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taxation. In that special legislation, Congress created a dual-
basis rule for petitioner’s assets “to ensure that, to the extent
possible, pre-1985 appreciation or decline in value of * * *
[petitioner’s] assets will not be taken into account for tax
purposes.” H. Conf. Rept. 98-861, supra at 1038, 1984-3 C.B.
(Vol. 2) at 292. Just as this legislation applies to
petitioner’s favorable financing intangible assets, DEFRA section
177(d)(2) governs the adjusted bases of petitioner’s so-called
real assets. For the purposes of determining a loss, DEFRA
section 177(d)(2)(A) provides that “the adjusted basis of any
asset of * * * [petitioner] held on January 1, 1985, * * * be
equal to the lesser of the adjusted basis of such asset or the
fair market value of such asset” as of January 1, 1985. Congress
created the special dual-basis rule specifically for petitioner
when it became a taxable entity to ensure that pre-1985
appreciation or decline in value would not be taken into account
for tax purposes. H. Conf. Rept. 98-861, supra at 1038, 1984-3
C.B. (Vol. 2) at 292. The adjusted basis rules of DEFRA section
177(d)(2)(A), which requires petitioner to calculate a loss using
an adjusted basis equal to the lesser of fair market value or
adjusted basis, address the kind of double counting that appears
to concern respondent.
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