In Uncategorized on 08/29/2016 at 16:09

Tax Court is on the road in Atlanta, GA, and Sam Kilpatrick, 2016 T. C. Memo. 166, filed 8/29/16, wants to deduct as ordinary-and-necessary some antiques he claims he bought for his home office, wherein he practices as a CPA.

Even if they were for home office purposes only, Sam’s antique paintings, oak chair and desk, old school clock, Minton soup tureens and crystal chandelier weren’t deducted per Section 179 and weren’t depreciated.

“…Kilpatrick claimed on his returns that the full costs of the home-office furnishings should be deducted for the years in which he paid for them.  He did not elect on his returns to treat the costs of the furnishings under section 179, which permits a taxpayer to elect to deduct the cost of certain types of tangible property as an expense for the year in which the property is first used, up to specified dollar limits.  See sec. 179(b).  Nor did Kilpatrick claim depreciation deductions on the returns for the furnishings in any amounts.  Consistent with his return position, Kilpatrick’s brief contends he is entitled to a business-expense deduction for the full costs of the furnishings.  His brief does not assert entitlement to depreciation deductions.  The IRS contends that the costs of the furnishings are personal expenses and that even if they are not, they can be deducted only through depreciation.” 2016 T. C. Memo. 166, at p. 21 (Footnote omitted, but it says if you want Section 179 largesse, you have to claim it on your return; use it or lose it).

But even if Sam now wants depreciation for his Section 155 beancount, he’s out of luck.

“Prior versions of the Internal Revenue Code had been interpreted to preclude a depreciation deduction for an asset the value of which is not reduced by the passage of time or by use.  See, e.g., Hawkins v. Commissioner, 713 F.2d 347 (8th Cir. 1983), aff’g T.C. Memo. 1982-451. This interpretation appears to us to be equally valid under the provisions of the Internal Revenue Code in effect for the years at issue.  Thus, we put the furnishings in Kilpatrick’s home office to the test of whether they would be adversely affected by the passage of time or Kilpatrick’s use of them.” 2016 T. C. Memo. 166, at pp. 22-23. (Footnote omitted, but Judge Morrison quotes Bittker & Lokken that “…the property’s value will not be affected by the taxpayer’s use and is likely to equal or exceed the taxpayer’s original cost or basis.” 2016 T. C. Memo. 166, at p 23, footnote 8).

So for tax purposes antiques keep their value, notwithstanding Antiques Roadshow’s “Vintage” series that shows the often-substantial fluctuations in the prices of antiques with the passage of time.

And woe betide Sam if he polishes the desk or refinishes the chairs; how often have I seen Leigh and Leslie Keno and their PBS colleagues destroy the dreams of antique owners whose grandmother, or, even worse, they themselves, polished away three-quarters of the value of their 1760 Rhode Island highboy or 1905 Tiffany & Co. desk lamp?

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