Cite as: 506 U. S. 546 (1993)
Opinion of the Court
Thus it is not by deciphering particular terms in the regulations accompanying § 1016 that the question in this case is answered, but by relying on the basic principles embodied in § 1016's directives. For our purposes, the most important mandate is found in § 1016(a)(2), which requires a taxpayer to subtract from his original basis in the property sold or exchanged "not less than the amount allowable [for exhaustion, wear and tear, obsolescence, amortization, and depletion] under this subtitle or prior income tax laws." In other words, whether or not the taxpayer ever took a depreciation, amortization, or depletion deduction with respect to the item he is selling, he must, for purposes of § 1016, determine whether such deductions were allowable with respect to that item, and reduce his basis by at least that allowable amount.8
To follow this directive, the taxpayer must determine whether parts of the item sold are subject to different tax treatments, and must treat those parts as different properties for purposes of § 1016. Thus, a taxpayer who bought an apartment building and the land it sits on for a single price must determine how much of that price went to pay for each, and must treat each cost as a separate asset for purposes of
ments and betterments," as used in the § 1016 regulations and in § 263, should probably be read as a single term unrelated to the term "improvements" in § 611 and the regulations thereunder. Second, § 263 is concerned only with identifying those payments that "serv[e] to create or enhance . . . what is essentially a separate and distinct additional asset." Commissioner v. Lincoln Savings & Loan Assn., 403 U. S. 345, 354 (1971). So long as one can say that a payment must either be "creating" a separate asset or "enhancing" one that already exists, one need not, for purposes of § 263, identify which of these is the case. Here, we are presented with precisely that question.
8 The directive is phrased "not less than the amount allowable" to account for the case in which a taxpayer has erroneously deducted more than that amount in a prior year. In that case, the taxpayer must reduce the basis by the greater amount actually deducted, to the extent that it resulted "(by reason of the deductions so allowed) in a reduction for any taxable year of [his] taxes." 26 U. S. C. § 1016(a)(2)(B) (1976 ed.); see § 1016(a)(2)(A).
557
Page: Index Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 NextLast modified: October 4, 2007