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Library Square and Fifth & Grand obtained under the variations;
(c) the Library Tower and the Grand Place Tower variations
provided only a one-time right to build Library Tower, the
Garage Plaza’s underground parking garage, and the Grand Place
Tower; (d) the OPA and the Cooperation Agreement gave no
meaningful rights to Library Square and Fifth & Grand extending
beyond the respective lives of the Library Tower and Grand Place
Tower buildings; and (e) Library Square and Fifth & Grand may
depreciate those development costs over a 31.5-year recovery
period.
2. Respondent’s Arguments
Respondent contends that none of the costs that Library
Square and Fifth & Grand incurred for development rights are
depreciable. Respondent asserts: (1) Library Square and Fifth
& Grand acquired building density rights or TFAR from other
parcels; (2) their development rights cannot be separated from
their Library Tower parcel or Grand Place Tower parcel and are
interests in land; (3) the MTP Designated Building Site and the
Library Tower and Grand Place Tower variations are akin to a
zoning change, and, thus, are not depreciable; and (4) the
development rights do not have a limited useful life.
B. Applicable Legal Standards
Section 167 generally allows as a depreciation deduction a
reasonable allowance for exhaustion and wear and tear of
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