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subtitle, adjusted (for the period before March 1,
1913) as provided in section 1016, is less than the
fair market value of the property as of March 1, 1913,
then the basis for determining gain shall be such fair
market value. * * *[11]
Since section 167(g)12 requires the same basis used for
determining gain to be used as the basis for amortization, it
follows that the amortization of an intangible asset held on
March 1, 1913, will be based on the fair market value of the
asset as of that date if that value is higher than the adjusted
11The regulations indicate that sec. 1053 and related Code
sections provide a dual-basis rule similar to DEFRA sec.
177(d)(2) with respect to property held as of Mar. 1, 1913. The
basis for determining gain is the cost or other basis, adjusted
as provided in sec. 1016 and other applicable provisions of ch. 1
of the Code, or its fair market value as of Mar. 1, 1913,
whichever is greater. Sec. 1.1053-1(a), Income Tax Regs. The
basis for determining loss is the basis determined in accordance
with pt. II (sec. 1011 and following), subch. O, ch. 1 of the
Code, or other applicable provisions of ch. 1 of the Code,
without reference to the fair market value as of Mar. 1, 1913.
Sec. 1.1053-1(b), Income Tax Regs.
12Sec. 167(g) followed a similar historical path as sec.
1053 in its inclusion in the Code. The rules stated in sec.
167(g) were enacted as sec. 114(a) of the Revenue Act of 1934,
ch. 277, 48 Stat. 710. As its basis for including those rules,
Congress stated that “Since in some cases the basis for
determining gain differs from the basis for determining loss, it
is necessary to specify definitely which of these bases is to be
used for depreciation * * * purposes.” H. Rept. 704, 73d Cong.,
2d Sess., at 29 (1934), 1939-1 C.B. (Part 2) 554, 575; S. Rept.
558, 73d Cong., 2d Sess., at 36 (1934), 1939-1 C.B. (Part 2) 586,
613. It is clear that Congress, in enacting this rule, made a
conscious choice that in the circumstance of a dual-basis rule,
the basis for depreciation (or amortization) is the basis used
for determining gain on the sale or other disposition of
property. It is clear that Congress envisioned the type of
situation, such as sec. 1053 and DEFRA sec. 177(d)(2), wherein
specific legislation provides different bases for purposes of
determining gain or loss.
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