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calculate depreciation with respect to the Crenshaw Blvd.
property for 1999 under Rule 155.
C. Whether Petitioners May Deduct More Depreciation on the W.
66th Street Property Than Respondent Allowed for 1999
Petitioners contend that they may deduct depreciation of
$16,714 with respect to the W. 66th Street property. We
disagree. Petitioners make the same argument relating to the W.
66th Street property as discussed in paragraph B, above. We
disagree for the reasons stated in paragraph B, above.
D. Whether Petitioners Must Capitalize the Deposit They Paid To
Acquire the Crenshaw Blvd. Property
Petitioners contend that they may deduct an earnest money
deposit of $30,087.57 they paid in 1999 for the Crenshaw Blvd.
property. We disagree.
Petitioners paid the $30,087.57 deposit to acquire the
Crenshaw Blvd. property. No deduction is allowed for capital
expenditures. Sec. 263(a). Amounts paid to acquire property
having a useful life substantially beyond the taxable year must
be capitalized. Sec. 1.263(a)-2(a), Income Tax Regs. Thus,
petitioners must capitalize the $30,087.57 deposit, include it in
their basis in the Crenshaw Blvd. property, and recover that cost
as part of their depreciation deduction discussed at paragraph B,
above.
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Last modified: May 25, 2011