Co-op Lessee Has Property Interest in Collapsed Wall
The Second Circuit determined that a lessee of a cooperative housing corporation held a property interest in the co-op’s common outdoor areas sufficient to allow her to claim a casualty loss deduction stemming from a collapsed retaining wall.
Thus, the Second Circuit vacated and remanded the Tax Court’s decision in Alphonso, 136 T.C. 247 (2011), vacated and rev’d, No. 11-2364-ag (2d Cir. 2/6/13). For coverage of the Tax Court proceedings, see “Tax Matters: Co-ops and Casualties,” June 2011, page 66.
The 70-foot-tall wall at the co-op, Castle Village in New York City, collapsed in 2005. Christina Alphonso was one of approximately 200 Castle Village tenant-shareholders who claimed a casualty loss deduction (in her case, $23,188) on their income tax returns for payment of their assessments by the co-op to rebuild the wall and repair related damage.
While noting that a leasehold interest could entitle its holder to a casualty loss deduction (citing Towers, 24 T.C. 199 (1955)), the Tax Court held that Alphonso’s lease agreement allowed her only to use the grounds and other common areas including the wall. Therefore, the court held, she held no ownership interest in them.
The Second Circuit noted, however, that the “house rules” allowing use of the grounds were incorporated by reference into Alphonso’s lease agreement. The court held this made her right to use the grounds part of a leasehold interest for which a casualty loss might be claimed.
On remand, the Tax Court will consider whether the wall’s collapse was a casualty within the meaning of Sec. 165(c)(3). For more, see “Tax Practice Corner: When Is a Casualty ‘Sudden, Unexpected, or Unusual’?”.
2013 Automobile Depreciation Limits Released
The IRS issued the 2013 inflation adjustments to the depreciation limitations and lease inclusion amounts for certain automobiles under Sec. 280F (Rev. Proc. 2013-21).
For passenger automobiles (other than trucks or vans) placed in service during calendar year 2013 to which 50% first-year bonus depreciation applies, the depreciation limit under Sec. 280F(d)(7) is $11,160 for the first tax year. Trucks and vans to which bonus depreciation applies have a slightly higher limit: $11,360 for the first tax year.
For passenger automobiles (other than trucks or vans) placed in service during calendar year 2013 to which bonus depreciation does not apply, the depreciation limit under Sec. 280F(d)(7) is $3,160 for the first tax year. For trucks and vans to which bonus depreciation does not apply, the limit is $3,360 for the first tax year.
Bonus depreciation does not affect the limits after the first year. For passenger automobiles, the limits are $5,100 for the second tax year; $3,050 for the third tax year; and $1,875 for each successive tax year. For trucks and vans, the limits are $5,400 for the second tax year; $3,250 for the third tax year; and $1,975 for each successive tax year.
Sec. 280F(c) limits deductions for the cost of leasing automobiles, expressed as an income inclusion amount according to a formula and tables prescribed under Regs. Sec. 1.280F-7. The revenue procedure provides an updated table of the amounts to be included in income by lessees of passenger automobiles and another for trucks and vans, in both cases with lease terms that begin in calendar year 2013.