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petitioners should have reported that a net operating loss
carryover of only $96,572 had been distributed to each of them
from the trust. Moreover, respondent determined that Conrad and
Carroll should have reported larger profits on the Schedules C
that reflected their operation of the gallery for the period
between the trust’s termination and December 31, 1995. With
respect to their joint income tax returns for 1996 and 1997,
respondent disallowed petitioners’ claimed net operating loss
carryovers.
OPINION
Petitioners’ Basis in the Collection for Purposes of Determining
the Gallery’s Cost of Goods Sold
Section 1014 provides the rules for determining the basis of
property acquired from a decedent. The general purpose of
section 1014 is to provide a basis for property acquired from a
decedent that is equal to the value placed upon such property for
purposes of the Federal estate tax. Sec. 1.1014-1(a), Income Tax
Regs. Accordingly, section 1014 provides that the basis of
property acquired from a decedent is the fair market value of the
property at the date of the decedent’s death or on the alternate
valuation date. Sec. 1014(a); sec. 1.1014-1(a), Income Tax Regs.
The fair market value of the property as of the date of the
decedent’s death or as of the alternate valuation date is deemed
to be the value of the property as appraised for purposes of the
Federal estate tax. Sec. 1.1014-3(a), Income Tax Regs.
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