1979 Tax Ct. Memo LEXIS 231 | Tax Ct. | 1979
MEMORANDUM FINDINGS OF FACT AND OPINION
DAWSON,
1979 Tax Ct. Memo LEXIS 231" label="1979 Tax Ct. Memo LEXIS 231" no-link"="" number="2" pagescheme="<span class=">1979 Tax Ct. Memo LEXIS 231">*232 OPINION OF SPECIAL TRIAL JUDGE
AARONS,
FINDINGS OF FACT
Some of the facts have been stipulated and are found accordingly.
At the time of filing the petition herein, petitioners (husband and wife) resided in Carson, California. On their joint returns for 1975, petitioners claimed rental loss of $13,819. Included in such loss was depreciation claimed in the total amount of $7332. This depreciation was divided among three properties as follows:
1533 Marcellana, Torrance, | |
California (Marcellana) | $4,000 |
1520 West 226th St., Torrance, | |
California (226th St.) | $2,440 |
Condominium, Lomita, | |
California (Condo-Lomita) | $ 892 |
1979 Tax Ct. Memo LEXIS 231" label="1979 Tax Ct. Memo LEXIS 231" no-link"="" number="3" pagescheme="<span class=">1979 Tax Ct. Memo LEXIS 231">*233 As to Marcellana, the parties dispute both the allocation between land and buildings and the useful life of the buildings. Marcellana, consisting of a house and a building with four apartments in it, was built in 1925 and purchased by petitioners in 1972 for $50,287. The property was in a bad state of repair when purchased, and without substantial repairs and renovation petitioners did not expect to be able to continue to collect rents from tenants of Marcellana. Petitioners claimed a useful economic life of 10 years for Marcellana and allocated $40,000 of the $50,287 purchase price to the buildings.
Respondent disallowed the depreciation in full. Petitioners offered no proof of useful life, nor allocation of purchase price other than the opinion of petitioner-wife, Edith Willits.
The 226th St. property was 14 years old when purchased by petitioners in 1975 for $104,377. Petitioners used a component method for depreciating that property: They used a 25 year life for the building structure, 33-1/3 years for the flatwork, 10 years for fixtures and hardware, 25 years for the roof, 16-2/3 years for plumbing and 12-1/2 years for electrical installations. Respondent would apply1979 Tax Ct. Memo LEXIS 231" label="1979 Tax Ct. Memo LEXIS 231" no-link"="" number="4" pagescheme="<span class=">1979 Tax Ct. Memo LEXIS 231">*234 a 25 year life to the whole building as a single composite account. Petitioners have no record of the actual cost of such components nor was there any allocation to the components in their purchase agreement. There is no proof in the record as to the relative values of such components in 1975, other than petitioner-wife's bare affirmations of such values. Petitioner-wife also feels strongly that the useful life of the roof was overstated on her return.
Condo-Lomita was purchased in 1975.It consists of a two bedroom apartment in a 24 unit condominium. It was new when purchased by petitioners for $29,389. The land on which the condominium improvement is located is not ground-leased. The only proof as to allocation of purchase price between land and building is a County of Los Angeles tax bill for fiscal year 1975-1976, allocating 54 percent of the condominium value to land.
OPINION
Petitioners' proof on all factual disputes in this case was either weak or non-existent. In the case of Marcellana, while contending for a 10 year useful life on the basis of the bad condition of the property petitioners nevertheless attributed 80 percent of the purchase price to the buildings. 1979 Tax Ct. Memo LEXIS 231" label="1979 Tax Ct. Memo LEXIS 231" no-link"="" number="5" pagescheme="<span class=">1979 Tax Ct. Memo LEXIS 231">*235 Respondent, however, disallowed the claimed depreciation in full. The Court is convinced that some portion of the $50,287 purchase price was attributable to the building and that the building had some useful life. Making approximations, to the best of our ability, (see
As to 226th St. we concur with respondent's disallowance of the component method used by petitioners. Regardless of the availability to petitioners of the component method had they constructed the building, had they been the first users, or had they been able to establish the relative values and useful lives of the components (contrast
With respect to Condo-Lomita, the question presented is primarily a legal one. Petitioners contend that they had no interest in land, and accordingly that 100 percent of their purchase price is depreciable.
A condominium is an estate in real property consisting of an undivided interest in common in a portion of a parcel of real property together with a separate interest in space in a residential, industrial or commercial building on such real property, such as an apartment, office or store. * * *
Moreover,
Land is the * * * material of the earth, whatever may be the ingredients of which it is composed, whether soil, rock, or other substance, and includes free or occupied space for an indefinite distance upwards as well as downwards, subject to limitations upon the use of airspace imposed, and rights in the use of airspace granted by law.
It thus seems clear under the California statutes that, contrary to their contention, petitioners owned, in addition to the physical unit, a non-depreciable interest in the airspace that it occupied as well as an undivided interest in the surface and subsurface "land."
We hold that petitioners did have an interest in land and, based upon the only evidence of allocation in the record herein (the property tax bill), that the purchase price was allocable 54 percent to land and 46 percent to depreciable improvements.
1979 Tax Ct. Memo LEXIS 231" label="1979 Tax Ct. Memo LEXIS 231" no-link"="" number="8" pagescheme="<span class=">1979 Tax Ct. Memo LEXIS 231">*238 To reflect the above holdings, as well as the parties' agreement on other rental expenses,