James M. and Ruth J. Riley - Page 18

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          to store soybeans, petitioners are not entitled to depreciation             
          deductions because they have not established the cost basis in              
          the storage building.                                                       
               With respect to depreciation deductions related to the tile            
          installed on the Ross farm, petitioners claimed $2,000 for each             
          of the years at issue.  Respondent allowed all of the $2,000                
          depreciation of the tile deducted for 2001 and $1,333 of the                
          $2,000 deducted for 2002.  Respondent disallowed the $667 of the            
          depreciation of the tile claimed for 2002 and all of the $2,000             
          deducted for 2003 because the 5-year useful life had expired in             
          September 2002.  Petitioners are not entitled to the claimed                
          depreciation deductions beyond the useful life of the tile.                 
               Petitioner testified that he paid approximately $129,000 for           
          the DeMoore farm, approximately $1,375 per acre ($220,000 for 160           
          acres) for the Sioux Valley farm, and $154,000 for the Ross farm.           
          He testified that all three properties were 160-acre farms that             
          he purchased at distress prices from the Federal Farm Credit                
          Association.  Petitioner did not submit copies of the purchase              
          agreements, deeds, mortgages, canceled checks, or any other                 
          documents to establish the purchase prices of the farms.                    
               Petitioner submitted an undated letter from Dan Pike &                 
          Associates Auction Co. listing farmland and building lots sold by           
          the company.  Petitioner has written “2005” on the letter.  The             
          letter provides no evidence of the value of petitioner’s farmland           

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