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amortization allowed or allowable. Rather, they dispute
respondent's contention that the annual amortization deduction
(as opposed to the bases of the assets in question) should be
calculated on the adjusted bases as corrected. What petitioners
fail to recognize, however, is that it is the adjusted bases of
the assets in question on which the annual amortization deduction
is calculated. The statutory language is clear: Only the
adjusted basis of property at the beginning of any taxable year
is subject to depreciation in that year. Secs. 167(g), 1011(a),
1016. Not only is respondent's reduction of the intangible
contracts' corrected amortizable bases by the greater of
amortization allowed or allowable in accord with sections 167(g),
1011(a), and 1016(a)(2), but it fully complies with the straight
line method as defined in section 1.167(b)-1(a), Income Tax
Regs., under which the allowance for amortization is computed
annually based on the adjusted basis of property at the beginning
of the taxable year.34
Moreover, we find Kilgroe v. United States, 664 F.2d 1168
(10th Cir. 1981) instructive as to the proper method for
calculating amortization for subsequent years where allowed
amortization was excessive in prior years. In Kilgroe, the
taxpayer took depreciation deductions for certain buildings
34 We note that petitioners do not challenge the validity of
sec. 1.167(b)-1(a), Income Tax Regs.
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