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the partners and their wives, as individuals, owned the ranch.
Therefore, petitioners contend that when the ranch was sold in
1988, petitioners and their cotenants were required to report the
gain realized on the sale after taking into account their cost
basis in the property unreduced by depreciation claimed in prior
years by the partnership.7 Second, petitioners argue that, even
if the partnership is deemed to have owned the ranch prior to its
sale in 1988, petitioner’s interest in the partnership was
transferred to the P.C. prior to the sale, and petitioners are
not individually liable for income tax on any portion of the
gain.
Respondent urges us to reject petitioners’ arguments,
contending, among other things, that the duty of consistency
binds the partnership and petitioners to their original reporting
position--that the ranch was partnership property.
7We question the premise on which petitioner relies in
making this argument. Petitioner assumes that if he can convince
us that the ranch was not partnership property, he can calculate
the gain from the sale of the ranch in 1988 using his cost basis
unreduced by depreciation because, in his capacity as the owner
of the ranch, he never claimed depreciation on the ranch. Sec.
1016(a)(2) requires that a taxpayer’s basis in property must be
reduced by depreciation allowed or allowable. Even if petitioner
did not claim depreciation with respect to the ranch,
petitioner’s basis in the ranch must still be reduced by the
depreciation allowable under sec. 167 if the requirements of sec.
167 are met.
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