Short tax year depreciation and subsidiaries.

• Jurisdiction: United States
• Date: 01 October 1997
• Author: Campbell, Geoffrey W.

Jack Kent Cooke, Inc., 4th Cir., 6/26/97, addresses the question of whether a full year of depreciation is allowed when property is placed in service by a subsidiary with a short tax year.

Jack Kent Cooke, Inc. (Cooke) purchased the common stock of Elmendorf Farm Inc. (EFI), an incorporated horse farm, on Dec. 28, 1984. This made EFI a wholly owned subsidiary of Cooke. Along with the stock purchase, other assets, including 353 horses, were also purchased; these were not corporate assets of EFI but were used on the farm.

The transaction closed on Dec. 28, 1984, at which time the horses were placed on Cooke's books. The tax year-end for the consolidated group was Dec. 31, 1984. On Jan. 15, 1985, Cooke's directors passed a resolution to place the horses on EFI's books and remove them from Cooke, retroactive to the date of acquisition. The...