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reflect the relative fair market values of the portions of the
larger property at the time of their purchase. Sec. 1.61-6(a),
Example (2), Income Tax Regs. Our determination of the
allocation of basis is a question of fact. Sleiman v.
Commissioner, 187 F.3d 1352, 1360 (11th Cir. 1999), affg. T.C.
Memo. 1997-530.
Respondent relies upon the assessed values of the Grissom
Parcels in 1987 to determine the relative values of those parcels
when they were purchased in 1985. Respondent allocated the
purchase price of $47,000 in 1985 to the parcels as follows:
Percentage
Parcel Assessed of Total Basis
Number Value Assessed Value Allocated1
Parcel 1 $12,500 32% $15,040
Parcel 2 14,955 39 18,330
Parcel 3 11,228 29 13,630
Totals 38,683 100 47,000
1The basis allocated equals the purchase price multiplied by the
percentage of the total assessed value of the parcels.
After accounting for selling expenses of $4,458, respondent
determined that petitioner realized a gain of $20,502.33
Petitioner contends that the methodology used by respondent to
allocate cost basis to the Grissom Parcels is arbitrary.
Petitioner argues that the cost basis should have been allocated
according to the relative fair market values of the parcels in
33Gain ($20,502) = sales price ($40,000) - selling expenses
($4,458) - basis ($15,040).
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