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issue because petitioner did not use those structures in his
farming or rental activities. Although petitioner used the house
as an office and for his lodging when he was at the farm,
petitioners are not entitled to deductions for depreciation of
the house for the years at issue. They are not entitled to
deductions for depreciation in 2002 because the 15-year
depreciation period expired in March 2001. Petitioners did not
claim depreciation deductions for 1998 and 1999. They thought
that they could extend the depreciation periods for the assets
for 2 years. The failure to claim the depreciation deductions in
1989 and 1999 does not extend the depreciation period into 2002
and later years. See sec. 1.167(a)-10(a), Income Tax Regs.
Petitioners are not entitled to a deduction for depreciation of
the house for 2001 both because they have not established their
original cost basis in the house (i.e., they have not established
the portion of the purchase price of the farm that is properly
allocated to the house) and because they have not shown that the
total depreciation allowed or allowable in earlier years had not
reduced their basis in the house to zero.7
Petitioner purchased the 160-acre Sioux Valley farm from the
Federal Farm Credit Association in 1990. He paid approximately
$1,375 per acre or approximately $220,000 for the Sioux Valley
7Had petitioners established that their cost basis in the
house was $75,000, they would have been entitled to depreciation
of only $833.33 ($5,000 x 2/12) for 2 months in 2001, not the
$5,000 claimed on the 2001 return.
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