- 24 -
Respondent speculates that since section 1016(a)(3) provides a
mechanism to account for amortization that may have occurred when
petitioner was not subject to Federal income taxation, then:
there would have been no reason for Congress to include
some specially tailored provision in * * * [DEFRA] �
177 to account for any depreciation in petitioner’s
assets that may have occurred before 1985, or after
1985; unless, of course, Congress chose to deviate from
the statutory scheme already in place in the Code. * *
* Congress did not so chose [sic] with respect to
intangible assets, only tangible assets.
We disagree with respondent’s interpretation of the interplay of
DEFRA section 177(d)(2) and section 1016(a)(3).
13(...continued)
during which the property was held by a person or
organization not subject to income taxation under
chapter 1 of the Code or prior income tax laws,
* * * * * * *
(b) The amount of the adjustments described in
paragraph (a) of this section actually sustained is
that amount charged off on the books of the taxpayer
where such amount is considered by the Commissioner to
be reasonable. Otherwise the amount actually sustained
will be the amount that would have been allowable as a
deduction:
(1) During the period described in paragraph
(a)(1) or (2) of this section, had the taxpayer
been subject to income tax during those periods,
* * *
* * * * * * *
In the case of a taxpayer subject to the adjustment
required by subparagraph (1) or (2) of this paragraph,
depreciation shall be determined by using the straight
line method.
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