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contract. The work that TGC was to perform under the 1992
contract included 18 discrete tasks, only one of which was to
design and construct the computer simulator. Other tasks re-
quired TGC, inter alia, to perform tests, to analyze the results
from those tests, to design and construct a test vehicle and
launcher, and to prepare various reports for SDC.
On the record before us, we find that, assuming arguendo
(1) that SDC transferred the computer simulator to TGC by gift,
(2) that any such gift is treated as a gift to petitioners for
purposes of determining petitioners’ entitlement for the taxable
years at issue to depreciation deductions with respect to that
simulator, and (3) that petitioners’ basis in the computer
simulator under section 1015(a) is SDC’s cost of, and thus its
basis in, that simulator, petitioners have failed to establish
that the amount that SDC paid to TGC pursuant to the 1992 con-
tract (i.e., $1,049,117) is SDC’s cost of, and thus its basis in,
the computer simulator. See secs. 1011(a) and 1012. On that
record, and making those assumptions arguendo, we further find
that petitioners have failed to carry their burden of establish-
ing (1) how much of the amount (i.e., $1,049,117) that SDC paid
to TGC pursuant to the 1992 contract was paid for the design and
construction of the computer simulator8 and therefore was SDC’s
8The record contains a so-called funds and man-hour expendi-
ture summary (expenditure summary) which detailed the amounts
(continued...)
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