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value that petitioner has allocated a portion of the acquisition
price.
Respondent agrees with neither of petitioner's contentions.
Instead, respondent argues that petitioner cannot allocate a
portion of the acquisition price to the Superdome leasehold
because the Revised Lease was not an asset obtained from the
Mecom Group. Respondent also contends that the allocation lacks
economic reality and was arbitrarily assigned for the purpose of
achieving favorable tax consequences. Moreover, with respect to
petitioner's alternative argument, respondent maintains that the
1975 Lease was without substantial value and fails to qualify as
a premium lease. We find petitioner's alternative argument
persuasive.
Section 1012 sets forth the general rule that the basis of
property shall be the cost of such property. Additionally,
section 1060 sets forth special allocation rules for determining
a transferee's basis in certain asset acquisitions. Section 1060
was added to the Internal Revenue Code in 1986, Tax Reform Act of
1986, Pub. L. 99-514, sec. 641(a), 100 Stat. 2085, 2282, and was
made effective for any acquisition of assets after May 6, 1986.
The parties have agreed to allocate the acquisition price in
accordance with the "residual method," as described in sec.
1.1060-1T(d)(2), Temporary Income Tax Regs., 53 Fed. Reg. 27040
(July 18, 1988).
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