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we read DEFRA section 177(d)(5) to provide the rules for purposes
of determining petitioner’s regular adjusted cost basis in its
assets as of January 1, 1985. This regular adjusted cost basis
is then used in various parts of DEFRA section 177(d)(2) as a
comparison to the fair market value of petitioner’s assets for
purposes of determining which of these two amounts should be used
as petitioner’s adjusted basis.
Section 1016(a)(3) generally deals with amortization
sustained in periods where a taxpayer was not subject to tax.
Section 1016(a)(3) provides that proper adjustment in respect of
property shall in all cases be made:
(3) in respect of any period--
(A) before March 1, 1913,
(B) since February 28, 1913, during which
such property was held by a person or an
organization not subject to income taxation under
this chapter or prior income tax laws,
* * * * * * *
for exhaustion, wear and tear, obsolescence, amortiza-
tion, and depletion, to the extent sustained;[13]
13Sec. 1.1016-4, Income Tax Regs., provides:
(a) Adjustments to basis must be made for
exhaustion, wear and tear, obsolescence, amortization,
and depletion to the extent actually sustained in
respect of:
(1) Any period before March 1, 1913,
(2) Any period since February 28, 1913,
(continued...)
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