14
original use within the meaning of section 48.7 Thus,
petitioners have failed to establish that the original use of
these bred heifers commenced with the partnership. Therefore, by
definition they are deemed to be used section 38 property when
the partnership acquired them.
Based on the record, we find that the cattle were placed in
service by the partnership on December 28, 1978. The cows, the
majority of which had already been bred, were in a state of
readiness for their assigned function of breeding. Petitioner
was a partner in the partnership at that time, and thus
petitioners are entitled to a distributive share of the
investment tax credit basis and cost for the purchase of the
cattle.8 For these purposes, the partnership's cost of the bred
heifers is limited to $100,000. Sec. 48(c)(2).
7 In determining whether livestock acquired by a taxpayer
is new or used property for purposes of the credit, the
committee intends that livestock be treated in a manner
consistent with that provided in the Treasury regulations
for other types of property. Property is considered new
property for purposes of the credit if its original use
commences with the taxpayer. The regulations provide that
the term "original use" means the first use to which
property is placed, whether or not the use corresponds to
the use of the property by the taxpayer. However, where the
property qualifies as a breeding or dairy animal, it will
normally be regarded as a new article at the time it is
first used for these purposes, that is, at the time its
suitability is established by the bearing of a calf or the
giving milk, assuming it has not been used for other
purposes prior to that time.
S. Rept. 92-437 at 33, (1971), 1972-1 C.B. 559, 577.
8 Petitioner's sharing ratio is based upon his profits-sharing
ratio, 85 percent of 18.182 percent or 15.455 percent.
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