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whether those principles apply in every case; it is sufficient
that we decide today that no rule of law proscribes their
application to the case at bar.
The developer line of cases addresses the basic problem of
what constitutes a proper adjustment to the basis of property in
the context of a common improvement that benefits lots in a
residential subdivision. Those cases focus on the common
improvement and not directly on the lots held for sale. If an
analysis of the common improvement indicates that (1) the basic
purpose of the taxpayer in constructing the common improvement is
to induce sales of the lots and (2) the taxpayer does not retain
too much ownership and control of the common improvement, then
the lots held for sale are deemed to include the allocable share
of the cost of the common improvement. The rationale of the
developer line of cases is that, when the basic purpose of
property is the enhancement of other properties to induce their
sale and such property does not have, in substance, an
independent existence, total cost recovery for such property
should be dependent on sale of the benefited properties. There
is no principled basis here to distinguish between residential
lots and the office buildings in question in the application of
that logic. In sum, we believe that the logic underlying the
developer line of cases is applicable outside the narrow context
of allocating the cost of common improvements to the bases of
residential lots held for sale, and, therefore, we shall
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