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entertainment facility.
We hold, therefore, that section 263A requires petitioners
to capitalize the expenses they incurred in retrofitting and
renovating the 5401 S. Broadway property during the years 1990,
1991, 1992, and 1993, which they deducted on their respective
income tax returns, except to the extent we conclude that certain
expenses are allocable to petitioners’ Schedule E rental activity
or were not substantiated.
IV. Petitioners’ 1992 and 1993 Depreciation Deductions
Section 167 generally allows as a depreciation deduction a
reasonable allowance for the exhaustion, and wear and tear of
property used in the trade or business, or property held for the
production of income. The period for depreciation of an asset
begins when the asset is placed in service and ends when the
asset is retired from service. Sec. 1.167(a)-10(b), Income Tax
Regs. An asset subject to depreciation is placed in service
“when first placed in a condition or state of readiness and
availability for a specially assigned function”. Sec. 1.167(a)-
11(e)(1)(i), Income Tax Regs. As a general rule, an asset “is
clearly considered as placed in service when it is acquired and
put into use” in a trade or business or income-producing
activity. Piggly Wiggly S., Inc. v. Commissioner, 84 T.C. 739,
746-748 (1985), affd. on another issue 803 F.2d 1572 (11th Cir.
1986); see also Simonson v. United States, 752 F.2d 341, 342-343
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