This case study is designed as a continuing assignment to supplement an advanced tax class.  Introductory taxation is a prerequisite for this case study.  The case is appropriate for students pursuing a tax track as well as those who take tax classes as elective courses. The case involves a “closed fact” planning situation in that the transaction, a sale of nonresidential realty, has already taken place and the taxpayer seeks advice regarding a change in depreciation that impacts the calculation and character of the recognized gain. The case fully integrates with lecture material in a typical tax research and planning course. It presents legislative, administrative, and judicial authority, tax planning strategies, communication requirements, and tax practice responsibilities.

The case involves a taxpayer who disposes of a 1988 building that was depreciated as nonresidential realty when practitioners believed that component depreciation of realty was not allowed under MACRS. In 1997, with the decision in Hospital Corporation of America, 109 TC 21, the Tax Court found for a taxpayer who broke out specific portions of a building’s cost that would have qualified for the investment credit under prior law and assigned shorter depreciable lives than those assigned for the realty. In the case study, the hypothetical taxpayer learns about this method of segregating a building’s cost and seeks advice from his tax practitioner regarding its retroactive application.

The objectives of this case study are to study the development of a body of tax law, analyze planning implications of the resulting stream of administrative authority, discuss practitioner ethics and responsibility, and understand filing requirements.  Begin the case by gathering "Case Facts" by clicking the button on the left side bar.