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generally based on cost. However, DEFRA sec.
177(d)(2)(A)(ii) modifies the application of sec. 1011,
I.R.C., by providing specific rules for determining the
adjusted basis of property held by P on Jan. 1, 1985.
Under DEFRA sec. 177(d)(2)(A)(ii), the adjusted basis
of any asset held by P on Jan. 1, 1985 (with the
exception of tangible depreciable property) shall, for
purposes of determining any gain, be equal to the
higher of the regular adjusted cost basis as provided
in sec. 1011, I.R.C., or the fair market value of such
asset as of Jan. 1, 1985. P’s adjusted basis as of
Jan. 1, 1985, for purposes of amortization, is the
higher of the regular adjusted cost basis or fair
market value on Jan. 1, 1985.
Robert A. Rudnick, Stephen J. Marzen, James F. Warren, and
Neil H. Koslowe, for petitioner.
Gary D. Kallevang, for respondent.
OPINION
RUWE, Judge: Respondent determined deficiencies in
petitioner’s Federal income taxes in docket No. 3941-99 for 1985
and 1986, as follows:
Year Deficiency
1985 $36,623,695
1986 40,111,127
Petitioner claims overpayments of $9,604,085 for 1985 and
$12,418,469 for 1986.
Respondent determined deficiencies in petitioner’s Federal
income taxes in docket No. 15626-99 for 1987, 1988, 1989, and
1990, as follows:
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