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The question we must decide in this opinion involves a
determination of petitioner’s basis for amortizing intangibles
that it allegedly held on January 1, 1985. Section 167(g), which
forms the basis for amortization deductions, provides that “The
basis on which exhaustion, wear and tear, and obsolescence are to
be allowed in respect of any property shall be the adjusted basis
provided in section 1011 for the purpose of determining the gain
on the sale or other disposition of such property.” (Emphasis
added.) Section 1011 generally provides for an adjusted cost
basis for purposes of determining gain or loss (regular adjusted
cost basis). From the arguments presented by the parties, it
appears that petitioner would have relatively little or no
adjusted basis in its alleged intangibles if the regular adjusted
cost basis provisions of section 1011 applied.
As a part of the legislation pursuant to which petitioner
became subject to Federal income taxation, Congress enacted
“special basis rules designed to ensure that, to the extent
possible, pre-1985 appreciation or decline in the value of * * *
[petitioner’s] assets will not be taken into account for tax
purposes.” H. Conf. Rept. 98-861, at 1038 (1984), 1984-3 C.B.
(Vol. 2) 1, 292. The special basis rules, which are contained in
DEFRA section 177(d)(2), 98 Stat. 711, provide a dual-basis rule
for purposes of determining any loss and any gain regarding
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