Subject: Golf Course Development
Title: Discussion of Potential Tax Benefits
IRC Sections: 144(a)(8)(B)
Date Produced: 09/95
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Taxpayer plans to develop and operate a golf course. Taxpayer believes
special tax benefits (presumably for federal income tax purposes) are available
specifically to golf course developments. Taxpayer thinks there is a ten-year
rule of some kind.
I did a key word search for anything containing the word golf or any
of its derivatives. The word search was performed against the following
-Internal Revenue Code
-all explanations contained in the CCH Standard Federal Tax Reporter
-the full text of the BNA Tax Management Portfolios (all series)
-the full text of CCH Federal Tax Service
-CCH Indiana Tax Reporter
-RIA Federal Tax Coordinator
As a result of that search, I did not find any significant tax benefits
or major tax issues specifically associated with the development or operation
of a golf course. I did find the following eclectic collection of items.
1. Amounts paid to golf caddies to or on behalf of a golf course were
held not to be wages for purposes of FICA and FUTA by Revenue Ruling 69-26.
2. Revenue generated by a golf course open to the public is not normally
considered rental income for purposes of the passive activity rules. Regulation
3. There is an issue with respect to whether various land improvements
commonly associated with a golf course are depreciable land improvements:
items such as sand traps, tees, greens, etc. Regulation Section 1.167(a)-2
holds that such items are part of the land and thus not depreciable.
4. Industrial development bonds are not qualified for the small issuer
exemption to the extent that more than 25% of the bond issue goes to the
development of inter alia a golf course. Section 144(a)(8)(B).