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Respondent argues that section 167(g) refers to section 1011
and that section 1011 does not refer to the specific adjusted
basis rule of DEFRA section 177(d)(2)(A)(ii). However, we point
out that DEFRA section 177(d)(2)(A)(ii) is a special transition
rule, which is applicable only to property held by petitioner as
of January 1, 1985, and which replaces section 1011 for purposes
of determining gain. Under these circumstances, we are not
inclined to read too much into the absence of a specific
reference to DEFRA section 177(d)(2)(A)(ii) in section 1011 or in
the enumerated subchapters cited in section 1011. Further, the
regulation interpreting section 1011(a) provides:
The adjusted basis for determining the gain or loss
from the sale or other disposition of property is the
cost or other basis prescribed in section 1012 or other
applicable provisions of subtitle A of the Code,
adjusted to the extent provided in sections 1016, 1017,
and 1018 or as otherwise specifically provided for
under applicable provisions of internal revenue laws.
[Sec. 1.1011-1, Income Tax Regs.; emphasis added.]
The parties advance differing interpretations of the
“internal revenue laws” language in section 1.1011-1, Income Tax
Regs. Petitioner argues that this language should be read to
incorporate any internal revenue law which specifically provides
the adjusted basis for determining gain or loss from the sale or
other disposition of property. Respondent contends that “It is
apparent” from the text of section 1011 “that alternatives to the
cost basis of � 1012 are confined to ‘this subchapter’
(subchapter O) or elsewhere in the Code, namely, subchapters C, K
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