Vitamin Village, Inc. - Page 11




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               The new houseboat was approximately 43 feet long and 28 feet           
          wide.  It had one floor with three rooms including a living area,           
          a photo studio, and office space, and an open-air deck on top               
          which included an outdoor cafe.  Adjacent to the new house boat             
          was the floating garage where Mr. Reeves’s boat and jet skis and            
          petitioner’s tables and chairs were stored.  The garage was                 
          covered and securely locked.                                                
               Petitioner and Mr. Reeves shared the costs of the floating             
          structures’ construction.  Mr. Reeves paid $80,717 in 1995 and              
          petitioner paid a total of $185,327:  $95,046 in FYE June 30,               
          1995, and $90,281 in FYE June 30, 1996.  Petitioner capitalized             
          the $185,327 and depreciated the costs over a 39-year period.               
          Petitioner reported these expenditures on its Forms 4562,                   
          Depreciation and Amortization, as leasehold improvements                    
          involving nonresidential real property and claimed depreciation             
          deductions of $721 and $2,726 in the fiscal years at issue,                 
          respectively.                                                               
               Petitioner and UMI used the floating structures for                    
          promotional events, meetings, and advertising photo shoots.                 
          Beginning in 1996, Mr. Reeves used the floating structures for              
          personal purposes approximately 10 times a year.  Neither                   
          petitioner nor Mr. Reeves kept a log of the use of the floating             
          structures.                                                                 








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Last modified: November 10, 2007