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3. Depreciation Deduction
Petitioner owned a condominium in Pennsylvania that she held
as rental property in 1998. Petitioner moved into the
condominium in January 2000 after being forcibly ejected from the
house in which she had lived for the previous 20 years in a
foreclosure action. Petitioner alleges that she is entitled to a
depreciation deduction on the condominium, which she held as
rental property.
The notice of deficiency disallowed the claimed depreciation
deduction on the basis that petitioner failed to establish
entitlement to the deduction.
A taxpayer may be allowed as a depreciation deduction a
reasonable allowance for the exhaustion, wear and tear of
property held for the production of income. Sec. 167(a)(2). A
taxpayer is generally required to keep sufficient records to
enable the Secretary to determine the taxpayer’s correct income
tax liability. Sec. 6001; sec. 1.6001-1(a), Income Tax Regs.
Petitioner did not provide any testimony or documentary
evidence concerning the amount of depreciation on the rental
property that she believes she is entitled to deduct or her
adjusted basis in the rental property.5 The burden is on
petitioner to substantiate the depreciation deduction. Rule
5 The Court held the record open after trial to allow
petitioner the opportunity to supplement the record on this
issue; however, no additional evidence was offered and a
supplemental stipulation was not filed.
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