§167 — Depreciation

records and reflects Congress' intention that a taxpayer's expenditures that are properly charged to a depreciable asset account do not qualify -' 23 - for section 174 expensing or amortization because they will be depreciated by the taxpayer under section'167 . Section 174(c), read in context, reinforces this conclusion because it clearly states that section 174 does not apply to such expenditures but that the depreciation allowance under section 167 with respect,to those expenditures is itsel

We agree with petitioner that brokerage customers are not, per se, distinguishable from newspaper subscribers in any way that would make the circumstances we consider here distinguishable from those in Newark. C. The Value and Useful Life of the Intangibles Petitioner Acquired 1. In General Having decided that the Rose customer accounts are amortizable under section 167, we now turn to the question of the values or amounts that are subject to amortization and the useful lives of the assets.

We agree with petitioner that brokerage customers are not, per se, distinguishable from newspaper subscribers in any way that would make the circumstances we consider here distinguishable from those in Newark. C. The Value and Useful Life of the Intangibles Petitioner Acquired 1. In General Having decided that the Rose customer accounts are amortizable under section 167, we now turn to the question of the values or amounts that are subject to amortization and the useful lives of the assets.

Because we find that MAXD's activities were not engaged in for profit and that petitioner has not produced evidence that he was regularly and actively involved in MAXD's activities in 2006, we need not decide whetherMAXD had commenced its activities in 2006.

However, given the statutory framework for determining adjusted basis, the interplay of DEFRA section 177(d)(2)(A) and section 1011 of the Code, and the reference in section 167(g) to the basis for determining gain as the basis to be used for amortization, we cannot agree that we are inferring petitioner’s basis for amortization by reason of congressional silence.

Respondent claims that petitioner is “attempting to adjust, for tax purposes, the asset side of its balance sheet to account for an overstatement in fair market value terms of its liabilities.” We cannot agree with respondent’s proposed characterization of petitioner’s favorable financing as a liability.

In arriving at this conclusion, we have considered and rejected the IRS's argument that a 2006 amendment to section 167(h)--codified at section 167(h)(5)-- indirectly shows that Congress had intended the treatment ofgeological and geophysical expenses under section 167(h) to be confined to owners ofmineral interests.

We hold, therefore, that FMC’s leasing of the airplane did not place the airplane in service for a specifically assigned function.

Accordingly, we hold that the deductions for depreciation and charitable contributions claimed by petitioner, San Jose Wellness (“SJW”), for its taxable years 2010, 2011, 2012, 2014, and 2015 are disallowed.2 We also hold that SJW is liable for an accuracy-related penalty for 2015.

Accordingly, we hold that the deductions for depreciation and charitable contributions claimed by petitioner, San Jose Wellness (“SJW”), for its taxable years 2010, 2011, 2012, 2014, and 2015 are disallowed.2 We also hold that SJW is liable for an accuracy-related penalty for 2015.

Accordingly, we hold that the deductions for depreciation and charitable contributions claimed by petitioner, San Jose Wellness (“SJW”), for its taxable years 2010, 2011, 2012, 2014, and 2015 are disallowed.2 We also hold that SJW is liable for an accuracy-related penalty for 2015.

In sum, we hold that with respect to the Oak Hill property, petitioners are entitled to deduct Schedule E repair expenses of$608, $1,199, $466, and $313 for tax years 2010, 2011, 2012, and 2013, respectively.

Petitioner is, pursuant to section 167, entitled to depreciation deductions relating to the garage, gantry crane, and welding equipment and has established the cost, useful life, and previously allowable deductions relating to these items.4 See Cluck v.

Airplane-Related Deprecation Section 167 provides a depreciation deduction for certain tangible property used in the taxpayer's trade or business.

Airplane-Related Deprecation Section 167 provides a depreciation deduction for certain tangible property used in the taxpayer's trade or business.

Discussion Section 167 provides for a-depreciation deduction for th e exhaustion, wear and tear, or obsolescence of property used,in a trade or business .

Recapture From the Sale of the South Dakota Property For 2000, petitioners deducted $346 as a depreciation allowance on the South Dakota property's workshop pursuant to section 167 .

Petitioner argues that it is entitled to its loss deductions in FYE March 31, 1996, and the loss carryback to FYE March 31, 1993, pursuant to section 167 and its governing regulations.

As explained below, we follow our decision in Duke Energy, and we hold that the proper recovery period for the gathering pipelines is 15 years.

Accordingly, we hold that section 167(c)(2) applies to petitioner’s acquisition of the vessel, and respondent’s Motion for Partial Summary Judgment will be granted.

Accordingly, we hold that these expenditures do not qualify for deduction as "ordinary and necessary" business expenses under section 162(a).

The Commissioner issued numerous revenue procedures, pursuant to section 167(m), prescribing or modifying class lives.

Section 167 provides, in part, for a depreciation deduction with respect to property used in a trade or business.

The former provides, in relevant part, that, if less than 30% of the unadjusted basis of rental property is subject to the allowance for depreciation under section 167, the taxpayer’s net passive activity income from the property shall be treated as non-passive-activity income (sometimes, the 30% test).

They argue that the reference to “property * * * of a character which is subject to the allowance under section 167 (relating to allowance for depreciation, etc.)” in section 174(c) and the reference to “property of a character subject to the allowance for depreciation” in section 41(b)(2)(C) mean property that is depreciable in the hands of the taxpayer.

On the record before us, we find that petitioner has failed to carry his burden of establishing that he is entitled for his taxable year 2003 under section 167(a) to the $17,723 "Deprecia- tion and section 179 expense deduction" that he claimed in Schedule C . Addition to Tax Under Section 6651(a)(1) and Accuracy-Related Penalty Under Section 6662(a ) Respondent determined that petitioner is liable for the addition to tax under section 6651(a)(1) and the accuracy-related penalty under section 66

Section 167 provides for depreciation of property used in a trade or business or held for the production of income. Section 1.167(a)-3, Income Tax Regs., interprets section 167 with respect to the depreciation of intangible assets in the following manner: If an intangible asset is known from experience or other factors to be of use in the business

case because they were acquired prior to the date of (continued...) - 42 - The parties agree that the acquired contract rights must be amortized using the straight line method.31 Under 30(...continued) enactment. 31 Numerous obsolete provisions in sec. 167 were eliminated by the Omnibus Budget Reconciliation Act of 1990 (OBRA-90), effective for property placed into service after Nov. 5, 1990 (the effective date). OBRA-90, Pub. L. 101-508, sec. 11812(a), 104 Stat. 1388, 1388-534. Specifically, s

1.167(a)-3, Income Tax Regs. 29 The parties seek a decision regarding allowable amortization for taxable years subsequent to 1990. Our decision with respect to the amortization allowance, however, is limited to the taxable years in issue in the instant case. 30 Sec. 197, which relates to the amortization of certain acquired intangible assets, was added to the Code by the Omnibus Budget Reconciliation Act of 1993 (OBRA-93), and applies to property acquired after Aug. 10, 1993 (the date of enactme

Section 167 allows a taxpayer to claim depreciation in relation to property used in a trade or business. Section 1.167(g)-1, Income Tax Regs., provides that with respect to property which has not been used in a trade or business and which is subsequently converted for use in a trade or business, the basis for computing depreciation shall be the pro

Section 167 allows a taxpayer to claim depreciation in relation to property used in a trade or business. Section 1.167(g)-1, Income Tax Regs., provides that with respect to property which has not been used in a trade or business and which is subsequently converted for use in a trade or business, the basis for computing depreciation shall be the pro

— In the case of any tangible property which— (i) is of a character subject to the allowance for depreciation provided by section 167 of the Internal Revenue Code of 1954, and (ii) is held by the Federal Home Loan Mortgage Corporation on January 1, 1985, the adjusted basis of such property shall be equal to the lesser of the basis of such property or the fair market value of such property as of such date.

1992-285, the Commissioner argued that core deposits are “liabilities” rather than “property” for purposes of section 167 and the regulations thereunder.

At best his estimate of the rental property’s fair market value must be considered a “guestimate” that hardly satisfies the precision required by section 167 and Treasury Regulation § 1.167(g)-1.

ee Woodward v. Commissioner, 397 U.S. 572, 575 (1970) (explaining that taxpayers cannot deduct a capital expenditure under section 162). Rather, the taxpayer may deduct capital expenditures over time through depreciation or amortization. See, e.g., §§ 167, 195(b). To obtain deductions, taxpayers must keep sufficient records to substantiate the amounts and business purposes of business expenses and provide them to the IRS to enable the IRS to determine the correct tax liability. See § 6001; Treas

Section 168 provides a depreciation method for section 167 depreciation deductions.

e taxpayer's residence. See sec. 280A. We need not consider whether section 280A precludes petitioner from being entitled to deduct the claimed depreciation expense because he failed to establish that he met the basic depreciation requirements under section 167. A taxpayer is allowed to deduct a reasonable allowance for the exhaustion and wear and tear ofproperty used in a trade or business or held for the production ofincome. Sec. 167(a). Depreciation is computed on the adjusted basis ofthe pro

Commissioner, T.C. Memo. 2009-168 (requiring taxpayer to depreciate cost of CD player and furniture because they had expected useful life greater than 1 year). The following expenses must be depreciated: $850 for blinds (Eddie Z), $1,,133 for vacuum (Oreck), $135 for desk (Staples), $260 for The utilities were billed separately t

e vehicle . Thus petitioner is not entitled to a deduction for rental or lease expenses . However, this does not end the matter . The purchase of .the vehicle is properly characterized as the purchase of a capital asset subject to depreciation under section 167 . A taxpayer may be entitled to a depreciation deduction for exhaustion, wear, and tear of property .used in a trade or business . Sec . 167(a)(1) ; INDOPCO, .Inc . v. Commissioner, 503 U.S. 79 (1992) . Automobiles are 5-year property und

1221, 1237 (1981) . This Court and several Courts of Appeals have held that taxpayers who invested in Alpha Telcom pay phones did not receive the benefits and burdens of owning the pay phones required for them-to.claim depreciation deductions under section 167 . Crooks v . Commissioner , supra at 656 ; Arevalo v . Commissioner , supra at 253 ; Sita v . Commissioner, T .C . Memo . 2007-363, affd . without published opinion 103 AFTR 2d 2009-1174, 2009-1 USTC par . 50,275 (7th Cir . 2009) . '( . .

Crooks v. Commissioner, supra at'656 ;'`-- Arevalo v . Commissioner, supra-at 253 ;' Sita v . Commissioner;:" T.C . Memo . 2007-363, affd . without-published 'opinion 101-AFTR:2d2009-1174, ' 2009-1 USTC--par . 50,'275 (7th Cir .' 2009 ) In Arevalo v . Commissioner, supra at 252, we identified eight factors for determining whether a ta

to increase the value of any property or estate . Sec . 263(a)(1) . Instead, if the capital expenditure is for property used in a trade or business or held for the production of income, the taxpayer may be allowed a deduction for depreciation under section 167 . See, e .g ., INDOPCO, Inc . v . Commissioner, supra at 83-84 . Taxpayers generally may deduct expenses that are ordinary and necessary in carrying on a trade or business under section 162(a), for the production or collection of income u

.) SERVED :APR 2 6 20071 - 2 - The issues for decision are : (1) Whether petitioner is entitled to section 179 expense and section 167 depreciation deductions; (2) whether petitioner has sufficient basis in a partnership entitling him to deduct partnership losses ; and (3) whether petitioner is liable for an accuracy-related penalty pursuant to section 6662(a) .

After concessions by the parties, the issues for decision are: (1) Whether petitioner is entitled to claim a deduction for depreciation under section 167 with respect to the pay phones in 2001 and (2) whether petitioner is entitled to claim a tax credit under section 44 for his investment in the pay phones in 2001.

After concessions by the parties,1 the issues for decision are: (1) Whether petitioners are entitled to claim a deduction for depreciation under section 167 for two pay phones in 1999; (2) whether petitioners are entitled to claim a tax credit under section 44 for their investment in the pay phones in 1999; and (3) whether petitioners are entitled to claim a loss under section 165(c)(2).

Dairy is entitled to deduct (1) the expenditure for insurance on the farmhouse as a reasonable and necessary business expense under section 162, (2) the property taxes under either section 162 or 164, and (3) the depreciation of the farmhouse under section 167. Petitioners posit that these latter expenses are not the Schmidts’ personal expenses because they are not the owners of the property. - 14 - B. Medical Expenses We first shall decide whether the payments by Hillside Dairy of the medical

Section 167 provides for a depreciation deduction with respect to property used in a taxpayer’s trade or business or held for the production of income by a taxpayer. Section 168 establishes the appropriate depreciation method, recovery period, and convention for tangible property. (The depreciation deduction allows a taxpayer to recover the cost of

are entitled under section 162(a) to deductions claimed on Schedules C, Profit or Loss From Business, for 1992 and 1993 with respect to a purported restaurant/nightclub business and, if so, in what amounts; (2) whether petitioners are entitled under section 167 to deduct depreciation expenses claimed with respect to two 1Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Pract

iod for property is based upon (but, generally, is shorter than) its “class life”. Section 168(i)(l) defines “class life” as “the class life * * * which would be applicable with respect to any property as of January 1, 1986, under subsection (m) of section 167”. Section 167(m)(l), in pertinent part, provided for depreciation “based on the class life prescribed by the Secretary which reasonably reflects the anticipated useful life of that class of property to the industry or other group.” Section

In pertinent part, section 167 provides: SEC.

In pertinent part, section 167 provides: SEC.

In pertinent part, section 167 provides: SEC.

In relevant part, section 167 provides: SEC.

In pertinent part, section 167 provides: SEC.

Consequently, Cascade argues, the payments are deductible under section 167 as allowances for depreciation of intangible property.7 On brief, respondent contends that the 1982 agreement must be disregarded as it was neither fair nor reasonable; rather, it was a mere vehicle to disguise distributions of corporate profits for favorable tax benefits.

s. Petitioners acknowledge that the expenses were not allowable deductions of 10Petitioners contend that if they cannot deduct all the muscle car expenditures during the years in issue, then they should be allowed to depreciate the muscle cars under sec. 167. Depreciation is not allowed on assets acquired for a business that has not begun operations. Piggly Wiggly Southern, Inc. v. Commissioner, 84 T.C. 739, 745-746 (1985), affd. on other issues 803 F.2d 1572 (11th Cir. 1986). Petitioners themse

It is elementary tax law that an expenditure that results in the acquisition of property with a useful life extending beyond the year of purchase is generally a capital expenditure, and the recovery of such expenditure is an allowance for depreciation under section 167 over the useful life or recovery period of the asset.

that a list of "paid subscribers" constituted an intangible asset with an ascertainable value and a limited useful life, the duration of which could be ascertained with reasonable accuracy, and, thus, qualified for the depreciation allowance under section 167. The case does not support petitioner's assertion that the value of professional services rendered constitutes a deductible advertisement expense. In light of the forgoing, we hold that the value of the telephone services rendered by petit

deductible as a research or experimentation expense, whether the cost is deductible under section 179; and (3) if the cost of the automobile engine is not deductible under either section 174(a) or section 179, whether the engine is depreciable under section 167. Some of the facts were stipulated. Those facts, with the annexed exhibits, are so found and are incorporated herein by reference. At the time the petition was filed, petitioners, husband and wife, were legal residents of Panama City, Flo

Generally, section 167 provides that there shall be allowed as a deduction for depreciation a reasonable allowance for exhaustion and wear and tear of property used in the taxpayer's trade or business or held for the production of income.

— The term “present class life” means the class life (if any) which would be applicable with respect to any property as of January 1, 1981, under subsection (m) of section 167 (determined without regard to paragraph (4) thereof and as if the taxpayer had made an election under such subsection).

e to a residence used by P’s sole shareholder. Held: Rental payments were not deductible to the extent that they exceeded the amount allowed by R. Held, further, the residence occupied by P’s sole shareholder was used in P’s business for purposes of sec. 167, I.R.C., and hence, depreciation may be deducted by P. F. Pen Cosby, for petitioner. Ronald T. Jordan, for respondent. - 2 - MEMORANDUM FINDINGS OF FACT AND OPINION LARO, Judge: This case is before the Court on the petition of Maschmeyer’s N

Section 174(c) excepts from this treatment any amounts expended for "the acquisition or improvement of land, or for the acquisition or improvement of property to be used in connection with the research or experimentation and of a character which is subject to the allowance under section 167" (relating to depreciation deductions for property used in a trade or business or held for the production of income).

Section 167 provides, in part, for depreciation deductions with respect to property used in a trade or business. Respondent determined that petitioner did not engage in the drilling business during the taxable years 1986 and 1991 with the intent to earn a profit. Respondent disallowed the deductions in 1991 attributable to petitioner's drill rig ac

Section 167 provides, in part, for a depreciation deduction with respect to property used in a trade or business. Depreciation allows the taxpayer to recover the cost of the property used in a trade or business or for the production of income. United States v. Ludey, 274 U.S. 295, 300-301 (1927); Durkin v. Commissioner, 872 F.2d 1271, 1276 (7th Cir

Section 167 provides, in part, for the allowance of a depreciation deduction with respect to "property used in a trade or business". Depreciation is designed to allow the taxpayer to secure a return for the cost of the property. United States v. Ludey, 274 U.S. 295, 300-301 (1927); Southeastern Bldg. Corp. v. Commissioner, 3 T.C. 381, 384 (1944), a

Section 167 provides, in part, for a depreciation deduction with respect to property used in a trade or business. Depreciation allows the taxpayer to recover the cost of the property used in a trade or business or for the production of income. United States v. Ludey, 274 U.S. 295, 300-301 (1927); Southeastern Bldg. Corp. v. Commissioner, 3 T.C. 381

Section 167 provides, in part, for a depreciation deduction with respect to property used in a trade or business. Depreciation allows the taxpayer to recover the cost of the property used in a trade or business or for the production of income. United States v. Ludey, 274 U.S. 295, 300-301 (1927); Southeastern Bldg. Corp. v. Commissioner, 3 T.C. 381

Section 179D instead allows taxpayers an immediate deduction with respect to expenditures for energy efficient improvements to commercial building property. Johnson v. Commissioner, 160 T.C. 18, 28–29 (2023). Section 179D(c)(1) defines “energy efficient commercial building property” (EECBP) as property which includes interior light

But under section 168(k)(1)(A) the depreciation deduction provided by section 167 includes a first-year special allowance (bonus depreciation) for qualified property acquired and placed in service before January 1, 2027.

original cost basis in the vehicle was $57,173. As of 2007, petitioner had been allowed $61,957 in depreciation deductions on the same vehicle. Thus, any additional amounts that he claimed for the years in issue were in excess of that allowed under section 167. Accordingly, we find that respondent has met his burden of proof as to the vehicle expenses and depreciation that petitioner claimed on Schedules C for the years in issue. We sustain respondent’s determination that none of these amounts

For example, section 261 (combined with section 161) ensures that certain capital expenditures for which a deduction is disallowed by section 263 are not deducted under section 167 for exhaustion and wear and tear.

The Commissioner then argues that the costs of obtaining bond proceeds should be capitalized into the underlying loan and thus are subject to depreciation under section 167 but not to MACRS under section 168—rendering those bond costs ineligible to be part of the “qualified low-income building” for purposes of section 42.

ion 179(a) and (d) generally allows an accelerated current- year deduction for the entire cost of tangible property that is purchased during the year for use in the active conduct of a trade or business and that would otherwise be depreciable under section 167. The deduction of the property’s entire cost is allowed regardless of when during the year the property was purchased. See Treas. Reg. § 1.179-1(c). If the taxpayer uses the property for his trade or business as well as for personal purpos

llegal Sale of Drugs,” provides: No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.

(SEI), is entitled to deduct rental expenses relating to a New York condominium as a business expense; (2) SEI is entitled to depreciation deductions under section 167 or 179 for personal property placed in the condominium and a Range Rover automobile; (3) petitioners’ net operating loss (NOL) deduction for 2011 carried over from 2010 must be reduced by $399,179; (4) petitioners are entitled to an NOL carryforward from 2011 for 2012; (5) petitioners are liable for accuracy-related penalties for

Section 1245 property includes “property which is or has been property of a character subject to the allowance for depreciation provided in section 167” that, as relevant here, is either (1) personal property or (2) a single-purpose agricultural or horticultural structure.

Section 179D(a) provides that “[t]there shall be allowed as a deduction an amount equal to the cost of energy efficient commercial building property placed in service during the taxable year.”7 For 7 As originally enacted in 2005, section 179D applied to property placed in service after December 31, 2005, and before January 1,

458, 468 (1980) (holding that partnerships made section 167(k) elections even though they failed to provide all the 17 [*17] information required but clearly identified the properties and expenditures as to which the elections were being made); Taylor, 67 T.C.

as tangible personal property which is section 1245 property and is “acquired by purchase for use in the active conduct of a trade or business.” § 179(d)(1). Section 1245 property is any property that is subject to the depreciation allowances under section 167. § 1245(a)(3). Since all section 179 property is a subset of section 1245 property absent a section 179 election, Short Stop would have been able to deduct only depreciation rather than the full cost of the property. See §§ 1245(a)(3), 16

n 195 and section 263 expenditures, see § 1016(a)(1) (providing a basis adjustment for expenditures “properly chargeable to capital account”), and in some cases can deduct them over subsequent years through depreciation or amortization, see, e.g., §§ 167, 195(b). As in effect for 2015, see supra note 12, section 174(a)(1) overrides these capitalization rules for research or experimental expenditures paid or incurred by the taxpayer during the taxable year “in connection with his trade or busines

erty must be reduced by depreciation allowed or allowable.” Id. “Even if [the husband had] not claim[ed] depreciation with respect to the ranch,” we concluded, his basis in the ranch would still have been “reduced by the depreciation allowable under sec. 167 if the requirements of sec. 167 [were] met.” Id. 30 [*30] incorporation, Mr. Giles transferred to the taxpayer corporation the notes he had received in exchange for the real property four years earlier. In 1936, the taxpayer received $80,000

tain property if net gain exceeds net losses. Sec. 1231(a)(1) and (2). Generally, section 1231 applies to the sale or exchange of property held for more than one year that is used in a trade or business subject to the allowance of depreciation under section 167. Sec. 1231(a)(3), (b)(1). As previously discussed, Dr. Filler did not receive the $100,000 of remuneration in connection with a sale 17Given our findings we need not reach the issue of whether in Dr. Filler’s hands rights to the 360 paten

Accordingly, petitioners are not entitled to deduct the equipment costs under section 179 as an expense for either 2013 or 2014 but, rather, must depreciate them under section 167, provided that they can show their entitlement to such depreciation deductions.

Depreciation Expenses Section 167 permits as a depreciation deduction a reasonable allowance for the exhaustion and wear and tear of property used in a trade or business or held for the production of income.5 A depreciation deduction is determined by reference to the adjusted basis of the property, the applicable depreciation method, the applicable recovery period, and

Wienke Section 167 generally allows a deduction for the exhaustion and wear and tear ofproperty used in a trade or business or for the production ofincome. To determine the annual depreciation deduction for the property, taxpayers are required to use the modified accelerated cost recovery system (MACRS) outlined in section 168. See Tax Reform Act of 1986,

Wienke Section 167 generally allows a deduction for the exhaustion and wear and tear ofproperty used in a trade or business or for the production ofincome. To determine the annual depreciation deduction for the property, taxpayers are required to use the modified accelerated cost recovery system (MACRS) outlined in section 168. See Tax Reform Act of 1986,

But this "useful life" exception applies only in the case ofassets "for which depreciation is determined under section 167 (other than under section 168 * * *)." M (emphasis added).

1221(a)(2) (excluding from the definition of"capital asset" "property * * * used in * * * [a taxpayer's] trade or business, ofa character which is subject to the allowance for depreciation provided in section 167, or real property used in his trade or business")." Thus, the issue in contention is not whether Unit B was a capital asset but instead whether it was property used in CSG's (and therefore Mr.

- 28 - [*28] Dateplaced Commissioner's inservice § 179 2003 § 167 2004 § 167 2005 § 167 2006 § 167 2007 § 167 reasonfor Property Cost expense deduction deduction deduction deduction deduction disallowance Computerequip.

2013-52, at *22 (considering section 274(d) "listed property" requirements with respect to applicable section 167 deductions); Singh v.

Section 167 Section 167(a) allows as a depreciation deduction a reasonable allowance for the "exhaustion, wear and tear" ofproperty used in a trade or business. Section 274(a)(1)(A) disallows deductions involving entertainment, amusement, or recreational activities unless the taxpayer establishes that the item was directly related to or associated

164 provides that certain taxes shall be deductible for the tax year in which they are paid or accrued.

2013-52, at *22 (considering section 274(d) "listed property" requirements with respect to applicable section 167 deductions); Singh v.

- 28 - [*28] Dateplaced Commissioner's inservice § 179 2003 § 167 2004 § 167 2005 § 167 2006 § 167 2007 § 167 reasonfor Property Cost expense deduction deduction deduction deduction deduction disallowance Computerequip.

A capital asset is property held by a taxpayer (whether or not connected with a trade or business), but that does not include propertyused in a taxpayer's trade or business for which depreciation is permitted under section 167,9 or real property used in the taxpayer's trade or business.

2013-52, at *22 (considering section 274(d) requirements with respect to applicable section 167 deductions); Singh v.

A capital asset is property held by a taxpayer (whether or not connected with a trade or business), but that does not include propertyused in a taxpayer's trade or business for which depreciation is permitted under section 167,9 or real property used in the taxpayer's trade or business.

Section 167 allows a deduction for the exhaustion and wear and tear of property used in a trade or business or held for the production ofincome." To determine the annual wear and tear oftangible property, the Code generally requires taxpayers to use the modified accelerated cost recovery system (MACRS) outlined in section 168. Under section 168(k)(

nt future benefit, or (3) are incurred in connection with the acquisition ofa capital asset. Lychuk v. Commissioner, 116 T.C. at 385-386. Capital expenditures, unlike ordinary and necessary business expenses, must be recovered over time. -12- [*12] Sec. 167. An automobile is a distinct capital asset, and generally its purchase price may not be deducted, but rather must be amortized over the useful life ofthe vehicle. Sec. 1.263(a)-2, Income Tax Regs. On their 2010 tax return, petitioners claimed

CRI-Leslie also claimed a deduction for depreciation under section 167 with respect to the hotel on its 2008 partnership return.

However, ifthe deduction does not entail a cash disbursement (because, for example, it is a loss deduction under section 165 or a depreciation deduction under section 167), the deduction year is based on separate timing rules.

However, petitioner failed to present evidence sufficient to substantiate his entitlement to any section 167 depreciation or section 179 accelerated depreciation deductions.

Repairs in the nature ofreplacements, to the extentthat they arrest deterioration and appreciablyprolong the life ofthe property, shall either be capitalized and depreciated in accordance with section 167 or charged against the depreciation reserve ifsuch an account is kept.

2013-52, at *22 (considering section 274(d) requirements with respect to applicable section 167 deductions); Singh v.

2013-52, at *22 (considering section 274(d) requirements with respect to applicable section 167 deductions); Singh v.

A leasehold ofland used in a trade or business may be property ofa characterwhich is subject to the allowance for depreciation provided in section 167. See Century Elec. Co. v. Commissioner, 192 F.2d 155, 160 (1951), aff'g 15 T.C. 581 (1950); Fackler v. Commissioner, 133 F.2d 509, 512 (1943), a_ff'f'g 45 B.T.A 708 (1941); City Nat'l Bank

A leasehold ofland used in a trade or business may be property ofa characterwhich is subject to the allowance for depreciation provided in section 167. See Century Elec. Co. v. Commissioner, 192 F.2d 155, 160 (1951), aff'g 15 T.C. 581 (1950); Fackler v. Commissioner, 133 F.2d 509, 512 (1943), a_ff'f'g 45 B.T.A 708 (1941); City Nat'l Bank

However, petitioner failed to present evidence sufficient to substantiate his entitlement to any section 167 depreciation or section 179 accelerated depreciation deductions.

Section 167 allows a depreciation deduction for the exhaustion, wear and tear, or obsolescence ofpropertyused in a trade or business. The period of - 12 - [*12] depreciation begins when the asset is placed in service.'8 "Placed in service" means the time that property is first placed by the taxpayer "in a condition or state ofreadiness and availab

Section 167 permits as a depreciation deduction a reasonable allowance for the exhaustion and wear and tear ofproperty used in a trade or business or held for - 15 - [*15] the production ofincome. This depreciation deduction is determined by reference to the adjusted basis ofthe property, the applicable depreciation method, the applicable recovery

Petitionerhas not establishedthat he is entitled to a depreciation deduction under section 167, nor has he provided us a basis on which we might estimate the claimed depreciation expense attributable to the Lompoc apartment complex.

Repairs in the nature ofreplacements, to the extent that they arrest deterioration and appreciably prolong the life ofthe property, shall either be capitalized and depreciated in accordance with section 167 or charged against the depreciation reserve ifsuch an account is kept.

Depreciation A corporation may claim depreciation deductions under section 167 for assets it uses in its trade or business.

and we sustain respondent's determination disallowing deduction of :he rent expenses by TPM. .B. Airplane Expenses and Depreciation TPM claims it is entitled to deduc ions for both airplane expenses under section 162 and airplane depreciation under section 167. Respondent argues that the airplane was not property used in TPM's tax managementbusiness or property otherwise held for the production ofincenie. We find that TPM has failed to prove its entitlement to deductions for the airplane expense

Depreciation Deductions Section 167 allows as a deduction a reasonable allowance for the depreciation ofproperty used in a taxpayer's trade or business or held for the production ofincome.

Bailey is entitled to an additional depreciation deduction under section 167 in the amount of$273 in 1994 with respect to the cost oftwo computers.

production ofincome", sec. 212(2). Section 167(a)(2) allows as a deduction a reasonable allowance for depreciation ofproperty "held for the production of income." The phrase "held for the production ofincome" has the same meaning in section 212 and section 167. Mitchell v. Commissioner, 47 T.C. 120, 129 (1966). Expenses and depreciation may be deducted only ifthe property is held for production ofincome during the taxable year at issue. Meredith v. Commissioner, 65 T.C. 34, 41 (1975). Section 1.

Section 1245 propertyincludes personal p operty that is or was subject to section 167 depreciation.

Depreciation H & M also claimed depreciation deductions in 2004 and 2005 for its pickup truck, though it didn't specify on its returns the actual "[b]usiness/investmentuse percentage" for those years.19 Section 167 allows taxpayers to deduct a reasonable allowance for the exhaustion and wear and tear ofpropertyused in a trade or business.

and 2007 Federal income taxes, plus accuracy- related penalties under section 6662(a).1 After concession ofsome issues, the issues for decision are: (1) for purposes ofrecapture and current expense deductions under section 179 and depreciation under section 167 relating to a Cessna 182 airplane, the extentto which petitioners have substantiated their business use ofthe airplane; (2) whether petitioners have substantiated their business use ofvarious other assets; (3) whether petitioners have sub

production ofincome", sec. 212(2). Section 167(a)(2) allows as a deduction a reasonable allowance for depreciation ofproperty "held for the production of income." The phrase "held for the production ofincome" has the same meaning in section 212 and section 167. Mitchell v. Commissioner, 47 T.C. 120, 129 (1966). Expenses and depreciation may be deducted only ifthe property is held for production ofincome during the taxable year at issue. Meredith v. Commissioner, 65 T.C. 34, 41 (1975). Section 1.

Section 167 allows a depreciation deduction for property used in a trade or business or held for the production ofincome. Sec. 167(a). Petitioner claims a $460 deduction for depreciation on items in his home office. The deduction was disallowed for lack ofsubstantiation. According to petitioner, this expense was incurred primarily on behalfofACM, b

Bailey is entitled to an additional depreciation deduction under section 167 in the amount of$273 in 1994 with respect to the cost oftwo computers.

The former provides, in relevant part, that, ifless than 30% ofthe unadjusted basis ofrental property is subject to the allowance for depreciation under section 167, the 4The conference report accompanyingthe enactment ofsec.

ring. The egulations under section 162(a) state that repairs "in the nature of replacements, to the extent that they arrest deterioration and appreciably prolong the life of the property, shall * * * be capitalized and depreciated in accordance with section 167". Sec. 1.162-4, Income Tax Regs. We believe that the repairs at issue, which involved the replacement--not repair--of a large number of items, not only appreciably prolonged the life of the property, but materially added to its -12- value

Qualifying section 179 property includes tangible property that is depreciable under.section 168 and is described - 8 - in section 1245(a) (3) and computer software that is depreciable under section 167 and described in section 1245(a) (3), but only if the property is acquired for use in the "active conduct of a trade or business." Sec.

Deprediation Section 167 gives us the general rules governing depreciation deductions.

axable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; (2) property, used in his trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or real property used in his trade or business; (3) a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by-- * * * * * (4) accounts or notes receivable acquired in the ordinary' co

Cost Recovery in General Although petitioner characterized the disputed cost recovery deduction as an amortization deduction, the parties seem to agree - 20 - that petitioner claimed it under section 167." Section 167(a) allows as a depreciation deduction a reasonable allowance for exhaustion, wear and tear, and obsolescence of property if the taxpayer uses such property in a trade or business or other income-producing activity.

Intangibles were amortized and depreciated under section 167 before the enactment of section 197.

Intangibles were amortized and depreciated under section 167 before the enactment of section 197.

Depreciation Generally A reasonable allowance for depreciation is allowed under section 167 for the exhaustion, wear and tear, and obsolescence of property used in a trade or business or held for the production of income.

axable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; (2) property, used in his trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or real property used in his trade or business; (3) a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by— * * * s¡: * * * (4) accounts or notes receivable acquired in the ordinar

Prior law had allowed taxpayers to amortize those covenants under section 167 over the life of the covenant .

Repairs in the nature of replacements, to the extent that they arrest deterioration and appreciably prolong the life of the property, shall either be capitalized and depreciated in accordance - 17 - with section 167 or charged against the depreciation reserve if such an account is kept .

ax purpose in putting a TIN/EIN on title to a vehicle . One possible argument for the proposition could be that ownership of. the RV would determine which entity would be permitted to claim depreciation deductions from Federal income tax under - 11 section 167 . Arevalo v . Commissioner , 124 T .C . 244, 251-252 (2005), affd . 469 F .3d.436 :(5th Cir . 2006) ; Travelers Ins . Co . v. St . Jude Hosp . , Nos .'90-1983, 90-2601,, 1992 WL 364999 (E .D . La . Nov . 24, 1992) . However, "Depreciation

Qualifying section 179 proper y includes tangible property that is depreciable under section~ 168 and is described in section 1245(a) (3) or computer softw re that is depreciable under section 167, but only if the prop rty is acquired for use in an active trade or business.

r section 168(c) and (e), the classification of tangible property determines its recovery period . Section 168(i)(1) defines "class life" as that "which would be applicable with respect to any property as of January 1, 1986, under subsection (m) of section 167" . Repealed in 1990, section 167(m) provided .for depreciation according to "the class life prescribed by the Secretary which reasonably reflects the anticipated useful life of that class property to the industry or . other group ." Essent

Repairs in the nature of replacements, to the extent that they arrest deterioration and appreciably prolong the life of the property, shall either be capitalized and depreciated in accordance with section 167 or charged against the depreciation reserve if such an account is kept .

Section 1250 applies to real property depreciable under section 167 (i.e., used in a trade or business) other than section 1245 property.

Qualifying-section 179^property includes tangible property~that is depfeciable under sectio~n 168 and is described - 10 - in section 1245(a) (3) or computer software that is depreciable under section 167 and described in section 1245(a) (3), but only if the property is acquired for use in the "active conduct of a trade or business." Sec.

for permanent improvements or bepterments made to increase the value of any property or estate)," sec. 263(a) (1), but may be allowed a depreciation deduction if the property is used ein a trade or business or is held for ths production of income, sec. 167; see INDOPCO, Inc. v.-Commissioner, 503 U.S. 79, 83-84 (1992)., Personal, living, and family -expenses, on the other hand, generally may not be deducted to any extent unless otherwise expressly allowed in the Code (e.g., State and local real

der section 168(c) and (e), the classification of tangible property determines its recovery period. Section 168(i)(1) defines "class life” as that "which would be applicable with respect to any property as of January 1, 1986, under subsection (m) of section 167”. Repealed in 1990, section 167(m) provided for depreciation according to “the class life prescribed by the Secretary which reasonably reflects the anticipated useful life of that class property to the industry or other group.” Essentiall

Repairs in the nature of replacements, to the extent that they arrest deterioration and appreciably prolong the life of the property, shall either be capitalized and depreciated in accordance with section 167 or charged against the depreciation reserve if such an account is kept .

Repairs in the nature of replacements, to the extent that they arrest deterioration and appreciably prolong the life of the property, shall either be capitalized and depreciated in accordance with section 167 or charged against the depreciation reserve if such an account is kept .

Section 274(d)(4) operates to disallow any deduction otherwise - 6 - allowable under, inter alia, section 167 with respect to, inter alia, any "listed .

ly are not deductible . Sec . 263(a)(1) ; sec. 1 .263(a)-2, Income Tax Regs . If the capital expenditure is for property used in a trade or business or held for the production of income, the'taxpayer may be allowed a deduction for depreciation under section 167 . See, e .g ., INDOPCO, Inc . v . Commissioner, 503 U .S . 79, 83-84 (1992) ., Alternatively, the cost may be expensed pursuant to section 179 if the requirements of that section are satisfied . The cost may not be expensed, however, in-t

Section 167(a ) allows a deduction for a reasonable allowance for the exhaustion , wear and tear, and obsolescence of property used in a trade or business or held for the production of income . The basis on which a depreciation deduction is allowable with respect to any property under section 167(a ) is the adjusted basis 12 - of the property, det

Section 167(a ) allows a deduction for a reasonable allowance for the exhaustion , wear and tear, and obsolescence of property used in a trade or business or held for the production of income . The basis on which a depreciation deduction is allowable with respect to any property under section 167(a ) is the adjusted basis 12 - of the property, det

The deficiencies stem generally from the disallowance of depreciation deductions under section 167 and the disallowance of disabled access credits under section 44.

) SE RVED tic 1 0 2007, - 2 - After concessions,2 the issues for decision are : (1) Whether petitioners are entitled to a depreciation deduction of $2,143 under section 167 for 2001 ; (2) whether petitioners are entitled to a disabled access credit under section 44 for 2001 ; and (3) whether petitioners are entitled to a business expense deduction of $14,000 under section 162 for 2002 .

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. 1.12

e operation of his computer software - 5 - business in 2003 and asserts he is entitled to deduct the car and truck expense of $3,977 and the labor expense of $7,070 under section 162 and depreciation of $3,479 for the use of the . Ford Taurus under section 167 . Section 162(a) allows a deduction for the ordinary and necessary expenses of carrying on .a trade or business . For a taxpayer to deduct expenses under section 162(a), the expenses must relate to a trade or business functioning at the ti

Further, section 167 generally allows as a depreciation deduction a reasonable allowance for the exhaustion and wear and tear of property used in a trade or business, or property held for the production of income.

Repairs in the nature of replacements, to the extent that they arrest deterioration and appreciably prolong the life of the property, shall either be capitalized and depreciated in accordance with section 167 or charged against the depreciation reserve if such an account is kept.

auty shop employees; (5) whether petitioner is entitled to deduct additional expenses allegedly paid in the beauty shop business and horse racing activities in 1988, 1989, and 1990; (6) whether petitioner is entitled to depreciation deductions under section 167 of $3,097 and $1,658 in 1989 and 1990, respectively, in relation to the beauty shop; (7) whether petitioner is liable for additions to tax and penalties under sections 6653(b)(1) and 6663 for filing fraudulent income tax returns for 1988,

Applicable Legal Standards Section 167 generally allows as a depreciation deduction a reasonable allowance for exhaustion and wear and tear of - 20 - property used in business or property held for the production of income.

In addition to the general business expense deduction rule of section 162, section 167 authorizes “as a depreciation deduction a reasonable allowance for the exhaustion, wear and tear (including a reasonable allowance for obsolescence)--(1) of property used in the trade or business, or (2) of property held for the production of income.” Sec.

After concessions by the parties, the issues for decision are: (1) Whether petitioner is entitled to claim a deduction for depreciation under section 167 with respect to the pay phones in 2001 and; (2) whether petitioner is entitled to claim a tax credit under section 44 for his investment in the pay phones in 2001.

e shall not include-- * * * * * * * (ii) Tangible property (other than real property) used or held for use in the controlled foreign corporation’s trade or business that is of a character that would be subject to the allowance for depreciation under section 167 or 168 and the regulations under those sections (including tangible property described in section 1.167(a)-2); (iii) Real property that does not give rise to rental or similar income, to the extent used or held for use in the controlled f

axable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; (2) property, used in his trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or real property used in his trade or business; (3) a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by-– (A) a taxpayer whose personal efforts created such property, (B) in the

axable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; (2) property, used in his trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or real property used in his trade or business; (3) a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by-- (A) a taxpayer whose personal efforts created such property, (B) in the

ear, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; - 7 - (2) property, used in his trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or real property used in his trade or business; (3) a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by-– (A) a taxpayer whose personal efforts created such property, (B) in the c

axable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; (2) property, used in his trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or real property used in his trade or business; (3) a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by-- (A) a taxpayer whose personal efforts created such property, (B) in the

167; see INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 83-84 (1992). Personal, living, and family expenses, on the other hand, may not be deducted unless the Internal Revenue Code expressly provides otherwise; e.g., State and local real property taxes are deductible pursuant to section 164(a)(1). Sec. 262(a). The statutory prohibitions of sectio

e rise to income shall not include— (ii) Tangible property (other than real property) used or held for use in the controlled foreign corporation’s trade or business that is of a character that would be subject to the allowance for depreciation under section 167 or 168 and the regulations under those sections (including tangible property described in section 1.167(a)-2); (iii) Real property that does not give rise to rental or similar income, to the extent used or held for use in the controlled f

Further, section 263(a) provides that no deduction shall be allowed for permanent improvements or betterments made to increase the value of any property.

expenditures for insurance, remodeling, landscaping, and repairs and maintenance as reasonable and necessary business expenses under section 162, (2) the property taxes under either section 162 or 164, and (3) the depreciation of the farmhouse under section 167. Petitioners posit that these latter expenses are not the Weeldreyers’ personal expenses because they are not the owners of the property. - 14 - B. Medical Expenses We first shall decide whether the payments by Dreyer Farms of the medical

axable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; (2) property, used in his trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or real property used in his trade or business; (3) a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by-– (A) a taxpayer whose personal efforts created such property, (B) in the

k Farm is entitled to deduct (1) the expenditures for insurance on the farmhouse as reasonable and necessary business expenses under section 162, (2) the property taxes under either section 162 or 164, and (3) the depreciation of the farmhouse under section 167. Petitioners posit that these latter expenses are not Mr. Tschetter’s personal expenses because he is not the owner of the property. - 13 - B. Medical Expenses We first shall decide whether the payments by Wolf Creek Farm of the medical e

Further, section 263(a) provides that no deduction shall be allowed for permanent improvements or betterments made to increase the value of any property.

Section 168(b)(3)(B) provides that the straight line method of depreciation is applicable to residential rental property and section 168(c) provides for the applicable recovery period of 27.5 years for such property.

When depreciable and nondepreciable property are acquired together for a lump-sum purchase price, the regulations under section 167 require basis to be apportioned based on relative value at the time of purchase.

Section 167 allows a depreciation deduction for property used in a trade or business or held for the production of income. Sec. 167(a). Generally, a taxpayer is required to substantiate deductions by maintaining books and records sufficient to establish the 6 We have credited petitioner with a payment of alimony of $346.84 on Sept. 14, 1997. While

axable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; (2) property, used in his trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or real property used in his trade or business; (3) a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by-- (A) a taxpayer whose personal efforts created such property, (B) in the

1.167(a)-1(b), Income Tax Regs. The taxpayer is responsible for establishing the reasonableness of the deduction for depreciation. Sec. 1.167(b)- 0(a), Income Tax Regs. Generally, depreciation deductions so claimed will be changed only where there is a clear and convincing basis for a change. Id. The parties disagree on the useful li

1.167(a)-1(b), Income Tax Regs. The taxpayer is responsible for establishing the reasonableness of the deduction for depreciation. Sec. 1.167(b)- 0(a), Income Tax Regs. Generally, depreciation deductions so claimed will be changed only where there is a clear and convincing basis for a change. Id. The parties disagree on the useful li

axable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; (2) property, used in his trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or real property used in his trade or business; (3) a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by— (A) a taxpayer whose personal efforts created such property, (B) in the

Section 167 allows a depreciation deduction for property used in a trade or business or held for the production of income if the expenses were incurred with a legitimate for-profit activity. Sec. 167(a); Hulter v. Commissioner, 91 T.C. 371, 392 (1988). Under section 183(a), no deductions attributable to the Amway activity are allowable unless the a

Section 167 allows a deduction for the depreciation of business equipment used in the course of a business or trade. Section 280F, however, reduces the amount of depreciation that can be claimed for passenger automobiles. Specifically, section 280F limits the allowable amount of depreciation to a multiple equal to the percentage of actual business

Similarly, a taxpayer is allowed to include purchase money indebted- ness in the basis of an asset for purposes of computing the allowance for depreciation under section 167 if the indebtedness is genuine indebtedness and represents an actual investment in property.

Similarly, a taxpayer is allowed to include purchase money indebted- ness in the basis of an asset for purposes of computing the allowance for depreciation under section 167 if the indebtedness is genuine indebtedness and represents an actual investment in property.

s of section 132, the term “working condition fringe” means any property or services provided to an employee to the extent that, if the employee paid for such property or services, such payment would be allowable as a deduction under section 162 or section 167. Sec. 132(d). Section 162 generally allows a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. Sec. 162(a). Section 167 allows a deduction for a reasonable allowance

e year. Rather, petitioner deducted the entire $999,151 as “Other Deductions” on line 26 of its 1995 Federal income tax return as an ordinary and necessary business expense pursuant to section 162 or, alternatively, as a depreciation deduction under section 167. Petitioner used a simplified production method to calculate inventory costs during the 1995 taxable year, allocating $510,124 in administrative, service, and support department costs to production under section 263A. In allocating sectio

Section 274(d)(4) operates to disallow any deduction otherwise allowable under, inter alia, section 167 with respect to, inter alia, any “listed property” unless the taxpayer satisfies the substantiation requirements of that section.39 “Listed property” 39Sec.

Vehicle Expenses and Depreciation Section 167 generally allows a depreciation deduction with respect to property used in a trade or business or held for the production of income.

Repairs in the nature of replacements, to the extent that they arrest deterioration, and appreciably prolong the life of the property, shall either be capitalized and depreciated in accordance with section 167 or charged against the depreciation reserve if such an account is kept.

- 5 - section 167 for the years in issue; (2) whether those seven cattle-breeding partnerships each have substantiated and are entitled to their claimed depreciation deductions with respect to their breeding cattle for the years in issue; (3) whether those seven cattle-breeding partnerships are entitled to certain interest deductions with respect to the

- 5 - section 167 for the years in issue; (2) whether those seven cattle-breeding partnerships each have substantiated and are entitled to their claimed depreciation deductions with respect to their breeding cattle for the years in issue; (3) whether those seven cattle-breeding partnerships are entitled to certain interest deductions with respect to the

- 5 - section 167 for the years in issue; (2) whether those seven cattle-breeding partnerships each have substantiated and are entitled to their claimed depreciation deductions with respect to their breeding cattle for the years in issue; (3) whether those seven cattle-breeding partnerships are entitled to certain interest deductions with respect to the

- 5 - section 167 for the years in issue; (2) whether those seven cattle-breeding partnerships each have substantiated and are entitled to their claimed depreciation deductions with respect to their breeding cattle for the years in issue; (3) whether those seven cattle-breeding partnerships are entitled to certain interest deductions with respect to the

- 5 - section 167 for the years in issue; (2) whether those seven cattle-breeding partnerships each have substantiated and are entitled to their claimed depreciation deductions with respect to their breeding cattle for the years in issue; (3) whether those seven cattle-breeding partnerships are entitled to certain interest deductions with respect to the

- 5 - section 167 for the years in issue; (2) whether those seven cattle-breeding partnerships each have substantiated and are entitled to their claimed depreciation deductions with respect to their breeding cattle for the years in issue; (3) whether those seven cattle-breeding partnerships are entitled to certain interest deductions with respect to the

a taxpayer’s basis in property must be reduced by depreciation allowed or allowable. Even if petitioner did not claim depreciation with respect to the ranch, petitioner’s basis in the ranch must still be reduced by the depreciation allowable under sec. 167 if the requirements of sec. 167 are met. - 10 - The Duty of Consistency The "duty of consistency", sometimes referred to as quasi- estoppel, is an equitable doctrine that Federal courts historically have applied in appropriate cases to preven

- 5 - section 167 for the years in issue; (2) whether those seven cattle-breeding partnerships each have substantiated and are entitled to their claimed depreciation deductions with respect to their breeding cattle for the years in issue; (3) whether those seven cattle-breeding partnerships are entitled to certain interest deductions with respect to the

These rulings were based on section 167, which was, at the time the rulings were issued, the only provision governing depreciation.

- 5 - section 167 for the years in issue; (2) whether those seven cattle-breeding partnerships each have substantiated and are entitled to their claimed depreciation deductions with respect to their breeding cattle for the years in issue; (3) whether those seven cattle-breeding partnerships are entitled to certain interest deductions with respect to the

- 5 - section 167 for the years in issue; (2) whether those seven cattle-breeding partnerships each have substantiated and are entitled to their claimed depreciation deductions with respect to their breeding cattle for the years in issue; (3) whether those seven cattle-breeding partnerships are entitled to certain interest deductions with respect to the

- 5 - section 167 for the years in issue; (2) whether those seven cattle-breeding partnerships each have substantiated and are entitled to their claimed depreciation deductions with respect to their breeding cattle for the years in issue; (3) whether those seven cattle-breeding partnerships are entitled to certain interest deductions with respect to the

Consequently, Cascade argues, the payments are deductible under section 167 as allowances for depreciation of intangible property.7 On brief, respondent contends that the 1982 agreement must be disregarded as it was neither fair nor reasonable; rather, it was a mere vehicle to disguise distributions of corporate profits for favorable tax benefits.

- 5 - section 167 for the years in issue; (2) whether those seven cattle-breeding partnerships each have substantiated and are entitled to their claimed depreciation deductions with respect to their breeding cattle for the years in issue; (3) whether those seven cattle-breeding partnerships are entitled to certain interest deductions with respect to the

Repairs in the nature of replacements, to the extent that they arrest deterioration, and appreciably prolong the life of the property, shall either be capitalized and depreciated in accordance with section 167 or charged against the depreciation reserve if such an account is kept.

axable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; (2) property, used in his trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or real property used in his trade or business; (3) a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by-- (A) a taxpayer whose personal efforts created such property, (B) in the

Hoyt III, Tax Matters Partner (OGT 90), purchased and acquired ownership of breeding sheep that are subject to an allowance for depreciation under section 167; (2) whether each partnership has substantiated and is entitled to its claimed depreciation deductions with respect to its breeding sheep for the years in issue; (3) whether RCR #4 and RCR #6 are entitled to certain interest deductions with respect to the promissory note each partnership issued in connection with the purported acquisiti

Hoyt III, Tax Matters Partner (OGT 90), purchased and acquired ownership of breeding sheep that are subject to an allowance for depreciation under section 167; (2) whether each partnership has substantiated and is entitled to its claimed depreciation deductions with respect to its breeding sheep for the years in issue; (3) whether RCR #4 and RCR #6 are entitled to certain interest deductions with respect to the promissory note each partnership issued in connection with the purported acquisiti

s 20- year property. Petitioners contend that the Tobacco Barn is 10- year or in the alternative 15-year property. We agree with respondent. The applicable recovery period is an element in the calculation of the deduction for depreciation allowed by section 167. As pertinent here, section 168(c) provides the following applicable recovery periods: Type of property Applicable recovery period 10-year property 10 years 15-year property 15 years 20-year property 20 years Section 168(e)(1) generally d

with the properties. On the present record, 7(...continued) respective bases in the properties and have not shown how any such bases are to be allocated between nondepreciable land and depreciable buildings. Consequently, they are not entitled under sec. 167 to depreciation deductions with respect to the properties for 1993 and 1994. - 18 - we find that petitioners did not prove that during the years at issue Mr. Hawthorne was holding those properties for the produc- tion of income. We further f

Hoyt III, Tax Matters Partner (OGT 90), purchased and acquired ownership of breeding sheep that are subject to an allowance for depreciation under section 167; (2) whether each partnership has substantiated and is entitled to its claimed depreciation deductions with respect to its breeding sheep for the years in issue; (3) whether RCR #4 and RCR #6 are entitled to certain interest deductions with respect to the promissory note each partnership issued in connection with the purported acquisiti

axable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; (2) property, used in his trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or real property used in his trade or business; (3) a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by— (A) a taxpayer whose personal efforts created such property, (B) in the

, and 1989 taxable years. The applicable 2*( . . . continued). from such allocation are not taxes imposed by chapter one of subtitle A of the Code. - 76 - recovery period is an element in the calculation of the deduction for depreciation allowed by section 167. The parties disagree as to whether the recovery period applicable to the furniture and fixtures is 5 years or 7 years. Petitioner argues that it is 5 years, while respondent argues that it is 7 years. UBC originally determined that the re

(Eason) were subject to depreciation under section 167 in petitioner's taxable years ending June 30, 1990 through 1993; and 3.

ely failed to meet the recordkeeping and substantiation requirements of section 274(d) for the claimed 2 Respondent did not determine or argue that any payments that petitioner persuaded the Court he had made should be capitalized and deducted under sec. 167 or sec. 168. - 14 - deduction of $1,829 for travel expenses. Petitioner provided no evidence at the trial; he was given additional time after the trial to provide documentary evidence and he failed to do so. Respondent's determination on thi

Section 167 generally allows as a depreciation deduction a reasonable allowance for the exhaustion, wear and tear of property used in a trade or business, or property held for the production of income. Under section 168, depreciation for an agricultural or horticultural structure is calculated using a 10-year recovery period. Sec. 168(e)(3)(D)(i).

r sec. 6655(a), does not change our conclusion that the amounts derived from such allocation are not taxes imposed by chapter one of subtitle A of the Code. - 77 - period is an element in the calculation of the deduction for depreciation allowed by section 167. The parties disagree as to whether the recovery period applicable to the furniture and fixtures is 5 years or 7 years. Petitioner argues that it is 5 years, while respondent argues that it is 7 years. UBC originally determined that the re

PINION HAMBLEN, Judge: Respondent determined the following deficiencies in petitioner's Federal income tax: - 2 - Taxable Year Deficiencies 1992 $204,000 1993 204,420 1994 204,321 1995 153,329 The issue for consideration is whether, for purposes of section 167, the aggregate fair market value of the 5-year covenant not to compete and the secrecy agreement is $3 million as claimed by petitioner on its corporate Federal income tax returns.1 Unless otherwise indicated, all section references are to

As relevant here, section 1231(b)(1) generally defines the term "property used in the trade or business" to include property used in the trade or business of a character that is subject to the allowance for depreciation under section 167 and that is held for more than one year.

Under section 167, depreciation deductions are allowed for the wear and 5 Respondent argues only that the Schedule C gross receipts should be recharacterized as dividends. Although respondent mentions in passing that the gross receipts should be recharacterized as dividends (or other income), respondent does not provide any analysis or argument for treat

r sec. 6655(a), does not change our conclusion that the amounts derived from such allocation are not taxes imposed by chapter one of subtitle A of the Code. - 77 - period is an element in the calculation of the deduction for depreciation allowed by section 167. The parties disagree as to whether the recovery period applicable to the furniture and fixtures is 5 years or 7 years. Petitioner argues that it is 5 years, while respondent argues that it is 7 years. UBC originally determined that the re

has been determined that the deduction * * * claimed as an amortization deduction with respect to amounts allocated to a subscription list included in the intangible assets acquired in the purchase of Ladies['] Home Journal, is disallowed in full because the amount paid was for non-amortizable intangibles, having an indeterminate useful life under Section 167 of the Internal Revenue Code.

tion of income", section 212(2). Section 167(a)(2) allows as a deduction a reasonable allowance for depreciation of property "held for the production of income." The phrase "held for the production of income" has the same meaning in section 212 and section 167. Mitchell v. Commissioner, 47 T.C. 120, 129 (1966). Expenses and depreciation may be deducted only if the property is held for production of income during the taxable year at issue. Meredith v. Commissioner, 65 T.C. 34, 41 (1975). Section

- 35 - In General Section 167 prescribes general rules governing the depreciation deduction, which provides a reasonable allowance for the exhaustion, wear and tear of property used in a trade or business or held for the production of income.

axable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; (2) property, used in his trade or business, of a character which is subject to the allowance for depreciation provided in section 167, or real property used in his trade or business; (3) a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property, held by-- (A) a taxpayer whose personal efforts created such property, (B) in the

However, an intangible asset with an ascertainable value and a limited useful life, the duration of which can be ascertained with reasonable accuracy, is depreciable under section 167, notwithstanding the fact that its value is related to the expectancy of continued patronage.

In General Section 167 prescribes general rules governing the depreciation deduction, which provides a reasonable allowance for the exhaustion, wear and tear of property used in a trade or business or held for the production of income.

- 35 - In General Section 167 prescribes general rules governing the depreciation deduction, which provides a reasonable allowance for the exhaustion, wear and tear of property used in a trade or business or held for the production of income.

has been determined that the deduction * * * claimed as an amortization deduction with respect to amounts allocated to a subscription list included in the intangible assets acquired in the purchase of Ladies[’] Home Journal, is disallowed in full because the amount paid was for non-amortizable intangibles, having an indeterminate useful life under Section 167 of the Internal Revenue Code.

Thus, to claim depreciation under section 167, petitioner must establish that he actually purchased and used such assets in his business during the taxable years in issue.

shall not apply to any expenditure for the acquisition or improvement of land, or for the acquisition or improvement of property to be used in connection with the research or experimentation and of a character which is subject to the allowance under section 167 (relating to allowance for depreciation, etc.) or section 611 (relating to allowance for depletion); but for purposes of this section allowances under section 167, and allowances under section 611, shall be considered as expenditures.

shall not apply to any expenditure for the acquisition or improvement of land, or for the acquisition or improvement of property to be used in connection with the research or experimentation and of a character which is subject to the allowance under section 167 (relating to allowance for depreciation, etc.) or section 611 (relating to allowance for depletion); but for purposes of this section allowances under section 167, and allowances under section 611, shall be considered as expenditures.

There is no indication, however, that Congress intended to reimpose the requirement, eliminated by ERTA, that a taxpayer must show the - 10 - useful life of property if the taxpayer is to determine the section 167 depreciation deduction under section 168.

class of stock outstanding; (2) Y, an individual, owns, and has owned for over 5 years, 85 percent of the outstanding stock of X; (3) X, under subpart A, distributes to Y real property of a character subject to the allowance for depreciation under section 167; (4) at the time of the distribution the fair market value of the property was $2,000 and its basis to the distributing corporation was $1,000; (5) there was no recapture income to X under section 1245 or section 1250 on the distribution o

31, 1984 16,191,156 683,296 16,874,452 46,304,949 With respect to the section 1250 leasehold improvements placed in service before January 1, 1981, petitioner claimed depreciation deductions under section 167, under the ADR class life system, using a 7-year useful life for the property.