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$3,081,584 in basis. Rule 142(a);5 Welch v. Helvering, 290 U.S.
111, 115 (1933).
The basis upon which depreciation deductions are allowed is
the basis determined under section 1012. Secs. 167(g), 1011(a).
Section 1012 provides in pertinent part: "The basis of property
shall be the cost of such property". Generally, the cost basis
of property purchased with other property is the fair market
value of the property received in the exchange. Philadelphia
Park Amusement Co. v. United States, 130 Ct. Cl. 166, 171, 126 F.
Supp. 184, 188 (1954); Williams v. Commissioner, 37 T.C. 1099,
1106 (1962). On the other hand, where a corporation acquires
property in exchange for its own stock, the cost basis of such
property is the fair market value of the stock given up in the
exchange.6 FX Sys. Corp. v. Commissioner, 79 T.C. 957, 963
(1982); Pittsburgh Terminal Corp. v. Commissioner, 60 T.C. 80, 87
(1973), affd. without published opinion 500 F.2d 1400 (3d Cir.
1974).
Fair market value has been defined as "the price at which
the property would change hands between a willing buyer and a
5Unless otherwise indicated, all Rule references are to the Tax Court
Rules of Practice and Procedure, and all section references are to the
Internal Revenue Code in effect for the taxable year in issue.
6This departure from the general rule is due to the fact that under sec.
1032, a corporation does not recognize any gain or loss when it receives
property in exchange for its own stock. FX Sys. Corp. v. Commissioner, 79
T.C. 957, 963 n.4 (1982); Pittsburgh Terminal Corp. v. Commissioner, 60 T.C.
80, 87-88 (1973), affd. without published opinion 500 F.2d 1400 (3d Cir.
1974).
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