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startup expenditures as distinguished from those constituting
capital expenditures.
For both reasons, respondent is sustained on this issue.
(c) Depreciation for 1991 and 1992
We now address whether petitioners are entitled to claim the
depreciation expenses remaining in dispute. Section 167 allows a
taxpayer to claim depreciation in relation to property used in a
trade or business. Section 1.167(g)-1, Income Tax Regs.,
provides that with respect to property which has not been used in
a trade or business and which is subsequently converted for use
in a trade or business, the basis for computing depreciation
shall be the property's fair market at that time if less than the
property's adjusted basis. Petitioners bear the burden of
establishing the proper depreciable basis with respect to those
assets underlying their claims for depreciation. Rule 142(a).
Petitioners have failed to substantiate their cost basis in
each of the assets presently underlying their disputed claims for
depreciation. Petitioner calculated the depreciable basis of
most of these assets by estimating each asset's fair market value
when placed in service. Petitioners, in support of this
position, cite Internal Revenue Service (IRS) Publication 334,
Tax Guide for Small Business, at 19, which states: "There are
many times when you cannot use cost as a basis. In these cases,
the fair market value of the property, or the adjusted basis of
certain property may be important." Petitioners interpret this
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