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on the issue as to how much of the partnership's tax basis in the
land is allocable to the water rights. Petitioners contend that
it would be impossible to allocate any specific portion of the
partnership's tax basis in the land to the partnership's water
rights, and petitioners therefore contend that the partnership's
total tax basis of approximately $675,000 in the land should be
allocated to the water rights and should offset the funds the
partnership received. Respondent objects to partial summary
judgment on this issue on the grounds that material facts remain
in dispute as to what portion of the partnership's tax basis in
the land should be allocated to the water rights.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue.
Set forth below are the facts relating to the above issues.
When the petition was filed, petitioners resided in Buckeye,
Arizona.
In 1928, the Boulder Canyon Project Act, ch. 42, 45 Stat.
1057 (1928), was enacted. This statute relates to use and
allocation of lower Colorado River water and is the statute under
which the water rights at issue in this case were granted.
In 1963, the Supreme Court decided Arizona v. California,
373 U.S. 546 (1963), and concluded therein, among other things,
that the Boulder Canyon Project Act preempted State
administration of lower Colorado River water and that under the
Boulder Canyon Project Act and administrative rulings of the U.S.
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