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respondent’s new contentions. Respondent counters that under our
Rules the new contentions should be treated only as new theories,
not as new issues, and that the burden of proof should remain
with petitioners on all factual matters.
Discussion
Generally, under Rev. Proc. 75-25, 1975-1 C.B. 720 (Rev.
Proc. 75-25), a real estate developer was allowed, in the first
year of construction of a development, to allocate to the
developer’s cost bases in separate lots to be sold certain
estimated construction costs of improvements common to the entire
development. The purpose of Rev. Proc. 75-25 was to allow a real
estate developer to spread more evenly and fairly the amount of
the developer’s gain or loss relating to a real estate
development over the years of construction. By allocating, at
the beginning of a development, estimated construction costs
relating to common improvements to the developer’s cost bases in
lots to be sold, a developer was able to recognize less income in
the early years of a development as lots were being sold (as a
result of the increased cost bases in the lots on which the
developer’s taxable gain was computed).
In Herzog Bldg. Corp. v. Commissioner, 44 T.C. 694, 702-703
(1965), involving a predecessor ruling to Rev. Proc. 75-25,3 we
3 Mim. 4027, XII-1 C.B. 60 (1933).
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