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depreciable basis in the Burke property and the underlying
transactions, and that the facts surrounding NII's acquisition of
the property in connection with the formation of NII were
extremely murky. Respondent reasonably argued that the old books
and records relied upon by petitioner were insufficient to prove
the basis of the Burke property, since they were often unreliable
and incomplete. Cf. Southern Pac. Transp. Co. v. Commissioner,
75 T.C. 497, 830-832 (1980) (holding that the taxpayer's
accounting records, standing alone, could not establish the cost
basis of its assets).
The record was almost devoid of evidence of Senter
Associate's basis in the Burke property. Moreover, the
incorporation arrangement was unusual in that the only evidence
that Charles Byrne held an interest in Senter was his testimony
that he had loaned one of the partners money to invest in Senter,
with the understanding that half of that interest would later be
transferred to him. A reasonable person could conclude such
testimony lacked credibility and that the exact nature of the
alleged sale of the Burke property to Senter and Senter's basis
in the property required the Court's determination.
In Smith v. United States, 850 F.2d 242, 246 (5th Cir.
1988), the Court observed: "The more difficult it is to appraise
a building * * * the more leeway we must give the IRS before
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