James M. and Ruth J. Riley - Page 15

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               Petitioners claimed depreciation deductions for the                    
          buildings on the DeMoore farm, the Sioux Valley farm, and the               
          Ross farm.  Respondent argues alternatively that petitioners are            
          not entitled to the depreciation deductions because they did not            
          use the buildings in their farming activities, the depreciation             
          periods had expired, and/or they have not established their cost            
          bases in the buildings.  We agree with respondent on all three              
               Petitioner bought the 160-acre DeMoore farm from the Federal           
          Farm Credit Association in 1986 for $129,000.  The buildings on             
          the farm included a house, four barns (the hog raising barn, the            
          granary, the storage building, and a fourth barn), a pole shed,             
          and two silos.  Petitioner did not allocate the cost of the farm            
          between the land and the buildings.  He estimated that the fair             
          market value of the DeMoore farm buildings was $75,000 and                  
          allocated that amount to the buildings on the farm.  He used the            
          house as an office and for lodging.  He did not use the pole                
          shed, the silos, or the barns in his farming operations.  On                
          their returns, petitioners reported that the buildings were                 
          placed in service in March 1986, had a recovery period of 15                
          years, and had a cost basis of $75,000.  They deducted $5,000               
          depreciation for 2001 and 2002.                                             
               Petitioners are not entitled to deductions for depreciation            
          of the pole shed, the silos, or the barns for any of the years at           

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