Universal Marketing, Inc. - Page 15




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          and the applicable convention.  Sec. 168(a); Hospital Corp. of              
          Am. v. Commissioner, 109 T.C. 21, 45 (1997).  Only the applicable           
          recovery period is at issue.                                                
               Property with 39-year recovery period is nonresidential real           
          property.20  Sec. 168(c).  Nonresidential real property is                  
          defined as “section 1250 property which is not-- (i) residential            
          rental property, or (ii) property with a class life of less than            
          27.5 years.”  Sec. 168(e)(2)(B).  Section 1250 property is any              
          real property (other than section 1245 property, as defined in              
          section 1245(a)(3)) which is or has been subject to the                     
          depreciation allowance under section 167.  Sec. 1250(c).  Real              
          property, as used in section 1250(c), includes land, improvements           
          thereto, including a building or its structural components, and             
          other real property except that which is defined in section                 
          1245(a)(3)(B)-(F).  Sec. 1.1250-1(e)(3)(i), Income Tax Regs.                
               Respondent concedes petitioner used the $80,000 to purchase            
          an asset and “petitioner’s records included documentation, at               
          least at one time, indicating that the check was, in fact, paid             
          to purchase equipment”.  Mr. Reeves credibly testified that the             

               20 MACRS generally classifies eligible personal property and           
          certain real property as 3-year property, 5-year property, 7-year           
          property, 10-year property, 15-year property, or 20-year property           
          and assigns that property to a corresponding recovery period on             
          the basis of the property’s class life.  Sec. 168(c), (e)(1),               
          (3).  MACRS generally classifies real property as residential               
          rental property or nonresidential real property, assigning                  
          recovery periods of 27.5 years and 39 years, respectively.  Sec.            
          168(c), (e)(2).                                                             





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