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c. Depreciation
Hillside Dairy deducted $1,667 in 1995, 1996, and 1997 for
depreciation of the farmhouse. Section 167(a) allows a
depreciation deduction from gross income for property used in the
taxpayer’s trade or business or held for the production of
income. Ordinarily, depreciation or amortization is available to
an owner of an asset with respect to the owner’s basis in the
asset. Hillside Dairy owned the Schmidt farm, including the
farmhouse. One of the business activities of Hillside Dairy was
the leasing of the Schmidt farm, including the farmhouse. Thus,
the farmhouse is property used in the corporation’s trade or
business.
We hold that Hillside Dairy is entitled to a deduction for
depreciation of the farmhouse for each of the years at issue as
claimed.
d. Taxes
Hillside Dairy deducted property taxes of $523 in 1995, $400
in 1996, and $388 in 1997 attributable to the farmhouse.
Hillside Dairy owned the Schmidt farm. Section 164(a)(1) allows
the owner of property a deduction for real property taxes. We
hold, therefore, that Hillside Dairy may deduct property taxes as
claimed in the years at issue.
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