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Madison Avenue generated the deduction in 1987 and
petitioners could have taken it then. But, according to
petitioners, they "goof[ed] up" and failed to deduct it.
Respondent reduced the basis of Madison Avenue by $819, thereby
increasing petitioners' gain.
OPINION
Section 1016(a)(2) provides that an adjustment to basis
shall in all cases be made for exhaustion, wear and tear,
obsolescence, amortization, and depletion, to the extent of the
amount allowed, but not less than the amount allowable.
Petitioners cannot defer the deduction putatively allowable in
1987 to the current year. Virginian Hotel Corp. v. Helvering,
319 U.S. 523 (1943). And they cannot include the previously
allowable depreciation deduction in their basis because they
failed to take the deduction in a prior year. United States v.
Ludey, 274 U.S. 295 (1927); Collins v. Commissioner, 18 T.C. 99
(1952), affd. 203 F.2d 565 (6th Cir. 1953); sec. 1.1016-
3(a)(1)(ii), Income Tax Regs. Therefore, petitioners' basis is
reduced by the $819 depreciation deduction that they could have
taken in 1987.
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