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More specifically with regard to the facts of this case,
petitioners contend that in 1976 when the partnership acquired
its interest in Harquahala Valley land, the partnership
simultaneously acquired an expectation of future water rights and
that the water rights that were acquired by the partnership in
1983 should be regarded as sufficiently related to or appurtenant
to the land to justify allocating the partnership's 1976 $675,000
cost of purchasing the land to the $1,088,132 the partnership
received in 1993 upon relinquishment of the water rights.
The facts relevant to this issue are clear, and on this
issue, neither party suggests any material facts in dispute. In
1976, when it acquired its interest in Harquahala Valley land,
and thereafter until 1983, the partnership did not have vested
property rights in Colorado River water.
In 1983, the partnership acquired, and in 1992, the
partnership relinquished, Colorado River water rights separately
from any acquisition or sale of its ownership interest in the
land. Before 1983, the partnership acquired the land without any
vested interest in Colorado River water. After 1992 (after its
water rights had been relinquished), the partnership owned the
same interest in the same land it acquired in 1976.
On these facts, no portion of the partnership's original
land acquisition cost or tax basis in the Harquahala Valley land
is properly allocable to the water rights the partnership
received in 1983 and sold or relinquished in 1992.
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