- 26 -
for years after 1984. See sec. 1016(a)(2). It does not follow
that section 1016(a)(3) requires a pre-1985 adjustment where the
higher fair market value basis is prescribed under DEFRA section
177(d)(2)(A)(ii).15 See sec. 1053 (providing a similar rule for
March 1, 1913 property);16 Even Realty Co. v. Commissioner, 1
15See also Staff of Joint Comm. on Taxation, General
Explanation of the Revenue Provisions of the Deficit Reduction
Act of 1984, at 551 (J. Comm. Print 1984), which states: “For
purposes of determining gain, the basis of any asset held on
January 1, 1985, is to be the higher of (1) the regular adjusted
basis of the asset in the hands of Freddie Mac (as determined
under Code secs. 1011-1023) or (2) the fair market value of the
asset on January 1, 1985.” Of course, the General Explanation is
not prepared by members of Congress, and it is not a part of the
legislative history. See Allen v. Commissioner, 118 T.C. 1, 14-
15 (2002). However, the statements in the General Explanation
are consistent with our reading of DEFRA sec. 177(d) and the
legislative history, and it is therefore entitled to respect.
See Intl. Multifoods Corp. v. Commissioner, 108 T.C. 579, 588
(1997).
16Sec. 1.1053-1(c), Example, Income Tax Regs., provides:
Example. (i) On March 1, 1908, a taxpayer
purchased for $100,000, property having a useful life
of 50 years. Assuming that there were no capital
improvements to the property, the depreciation
sustained on the property before March 1, 1913, was
$10,000 (5 years @ $2,000), so that the original cost
adjusted, as of March 1, 1913, for depreciation
sustained prior to that date is $90,000. On that date
the property had a fair market value of $94,500 with a
remaining life of 45 years.
(ii) For the purpose of determining gain from the
sale or other disposition of the property on March 1,
1954, the basis of the property is the fair market
value of $94,500 as of March 1, 1913, adjusted for
depreciation allowed or allowable after February 28,
1913, computed on $94,500. Thus, the substituted
basis, $94,500, is reduced by the depreciation
(continued...)
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011