- 36 -
and further with regard specifically to loss deductions and
intangible assets, Mertens provides:
When an asset is composed of individual accounts which
cannot be accurately valued, the asset is treated as an
indivisible asset and termination of any individual
account merely diminishes the value of the indivisible
asset. Unless the taxpayer can prove with reasonable
accuracy the basis in the particular account lost, the
indivisible asset rule prohibits a loss deduction,
since the requirement that the loss be evidenced by a
closed and completed transaction is not met. * * *
[7 Mertens, Law of Federal Income Taxation, sec. 28.15,
at 49-50 (2001 rev.).]
Petitioner herein acknowledges that loss deductions under
section 165(a) are allowable only on an asset-by-asset basis, not
on the basis of some cumulative diminution in the fair market
value of an aggregate group of assets of which the lost asset is
a part. Accordingly, petitioner agrees that under section 165(a)
it is only the amount of a taxpayer’s specific tax basis in
separate and discrete assets that constitutes an allowable loss
deduction. Accordingly, petitioner argues, as indeed it must,
that the $4 million (in claimed loss deductions for 1994 relating
to petitioner’s group contracts) represents the cumulative total
of 376 separate loss deductions, reflecting the cumulative total
stepped-up January 1, 1987, tax basis in each of petitioner’s 376
group contracts.11
11 In the instant case, with regard specifically to the
burden of proof and particularly to the difference between the
(continued...)
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