§1012 — Basis of property—cost

Respondent claims that the present case is factually distinguishable from the developer line of cases and .that the principles of those cases "have never been applied outside the narrow factual context in which those cases arose." In the alternative, respondent argues that, if the developer line of cases "have relevance beyond their unique facts", the present case fails

We disagree with petitioner's position that section 1012 and the regulations thereunder are determinative of the cost of Consolidated's customer cores for purposes of section 471.

Respondent contends that “It is apparent” from the text of section 1011 “that alternatives to the cost basis of § 1012 are confined to ‘this subchapter’ (subchapter O) or elsewhere in the Code, namely, subchapters C, K - 14 - and P.” He argues that section 1011 does not refer to an adjusted basis specified in other “internal revenue laws”, and the language in section 1.1011-1, Income Tax Regs., “does not provide for alternatives

That is because section 1012 provides that the basis of property is equal to the cost of the property.

Accordingly, we hold that Mr.

Rather, the rebate was a reduction in the purchase price, requiring a downward adjustment to the basis of the automobile pursuant to section 1012.

Section 1012 provides that, generally, the basis ofproperty shall be the cost ofsuch property.

The trusts' bases in the currency and the shares purchased by Tigers Eye for them are, pursuant to section 1012, the costs ofthat property, and those costs, in this case, are entity items.

Accordingly, we hold the State tax credits petitioners sold are capital assets.

Applying the last-in-time rule, we hold that section 59(a)(2) is - 17 - the last expression of the sovereign will and that it takes precedence over the U .S .-Canada Convention to the extent there is a conflict between them.

With exceptions not here relevant, section 1012 provides the following rule: “The basis of property shall be the cost of such - 53 - property”.

1012. Under section 1016(a) (1), the basis of property must be adjusted for expenditures, receipts, losses, or other items properly chargeable to capital account. A taxpayer has the burden of proving the basis of property for purposes of determining the amount of gain the taxpayer must recognize. O'Neill v. Commissioner, 271 F.2d 44, 50 (9th Cir..1959), affg. T.C. Memo. 1957-193. "The special adjusted basis computation rule that applies to bargain sales to charitable organizations is inapplicabl

— The adjusted basis for determining the gain or loss from the sale or other disposition of property, whenever acquired, shall be the basis (determined under section 1012 or other applicable sections of this subchapter and subchapters C (relating to corporate distributions and adjustments), K (relating to partners and partnerships), and P (relating to capital gains and losses)), adjusted as provided in section 1016.

r section 1016(a)(1). Petitioner proposes the following allocation: 2 As pertinent to this case, sec. 1011 provides that the adjusted basis for determining gain or loss from the sale or other disposition of property is the cost of such property, see sec. 1012, adjusted as provided in sec. 1016. Sec. 1016(a)(1), in part, provides that proper adjustment is to be made for expenditures, receipts, losses, or other items, properly chargeable to capital account. Sec. 1.1016-2(a), Income Tax Regs., in p

r section 1016(a)(1). Petitioner proposes the following allocation: 2 As pertinent to this case, sec. 1011 provides that the adjusted basis for determining gain or loss from the sale or other disposition of property is the cost of such property, see sec. 1012, adjusted as provided in sec. 1016. Sec. 1016(a)(1), in part, provides that proper adjustment is to be made for expenditures, receipts, losses, or other items, properly chargeable to capital account. Sec. 1.1016-2(a), Income Tax Regs., in p

Petitioner further contends that section 1012 and the regulations thereunder relating to the cost basis of property require Consolidated to ascertain the respective fair market values of the customer cores that it acquired in determining the cost of those cores for purposes of section 471.

Under section 1012 of the Code, petitioners' basis in the Capital Note was $1,060,000, its face amount. 4. Alternatively, under section 1012 of the Internal Revenue Code, NAC Corporation's basis in the Capital Note was $1,060,000, its face amount. All of petitioners' arguments presuppose that the Capital Note represents genuine indebtedness. Since we do

1012 (basis equals the cost to acquire property); see also Astone v. Commissioner, T.C. Memo. 1983-747, 47 T.C.M. (CCH) 632, 656 n.24 (1983) ("Clearly, the giving ofa mortgage on a piece ofproperty during the period of ownership does not, in itself, increase the basis ofthe property"). The FCSA mortgage did not increase Andersen's basis in the

Under section 1012 basis is generally the property's cost. "Cost" is any "amount paid for such property in cash or other property." Sec. 1.1012-1(a), Income Tax Regs. Although cost basis generally equals the price paid for property, irrespective ofits actual value, this rule might not apply "where a transaction is based upon 'peculiar circumstances' whic

eration paid usually determines a taxpayer's basis in a capital asset such as the note. Section 1011 directs us that the basis to be used to determine gain or loss from a sale or other disposition of - 26 - [*26] property should be determined under section 1012. Section 1012 equates basis with the cost ofthe property. A liability that an asset's buyer assumes is included in the total cost ofacquiring property. Wash. Mut. Inc. v. United States, 636 F.3d 1207, 1217 (9th Cir. 2011).¹6 Putanec's ini

eration paid usually determines a taxpayer's basis in a capital asset such as the note. Section 1011 directs us that the basis to be used to determine gain or loss from a sale or other disposition of - 26 - [*26] property should be determined under section 1012. Section 1012 equates basis with the cost ofthe property. A liability that an asset's buyer assumes is included in the total cost ofacquiring property. Wash. Mut. Inc. v. United States, 636 F.3d 1207, 1217 (9th Cir. 2011).¹6 Putanec's ini

Adjusted basis is generally basis determined under section 1012, adjusted as determined under section 1016.

Subchapter K creates a detailed and complex system of rules for characterizing transactions between the partnership and the partners, computing and/or characterizing partnership income, assets, and liabilities, allocating those items among the partners, and determining and making adjustments to a partner’s basis (cost for tax purposes under section 1012 except as otherwise provided in subchapter K) in the partnership for his share of those items.

1012; see also sec. 1.707-3(a) (2), Income Tax Regs. To be sure, Mr. Valdez structured the transactions using entities he controlled, aiming to manipulate the rules applicable to partnership taxation so that he could sell to his U.S. "investors" foreign built-in losses that they could personally -34- apply as ordinary losses. He provided the

Basis Section 1012 sets forth the foundational principle that the basis of property for tax purposes shall be the cost of the property. Cost, in turn, is defined by regulation as the amount paid for the property in cash or other property. Sec. 1.1012-l(a), Income Tax Regs. Petitioners argue that they have a cost basis in their State tax credits. On their

Section 1012 sets forth the fundamental proposition that “the basis of property shall be the cost of such property”. It is well settled that the cost of property to a mortgagee who receives a voluntary conveyance on account of a debt is the property’s fair market value. See Commissioner v. Spreckels, 120 F.2d 517, 520 (9th Cir. 1941); Kohn v. Commi

* *, and (B) the shareholder’s adjusted basis of any indebtedness of the S corporation to the shareholder * * * - 10 - In pertinent part, section 1011 provides that the adjusted basis of property shall be the basis of such property determined under section 1012. In pertinent part, section 1012 provides that the basis of property shall be the cost of such property. III. Arguments of the Parties Petitioners argue: “The application of traditional debt- equity principles results in the characterizat

With exceptions not here relevant, section 1012 provides the following rule: “The basis of property shall be the cost of such property”.

As pertinent here, section 1011(a) provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016, and section 1012 provides that the basis of property is its cost.

not engaged in for profit under section 183(a); (2) alternatively, whether, under section 162(a), some of the expenses in connection with the activity were substantiated; (3) whether petitioner, in an unrelated business activity, established, under section 1012, a basis for an asset used in that activity upon which depreciation would be allowable under section 167(a); and (4) whether petitioner is liable for the penalties under section 6662(a).

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

Petitioner bears the burden of proving that respondent's deficiency determination is in error. See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). B. Dividend Income Gross income includes dividends. See sec. 61(a)(7). Petitioner offered no evidence to dispute respondent's determination that he received, but did not report, div

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

- 542 - Section 1011 provides that the adjusted basis for determining the gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

1012.2 Second, when she acquired her husband's interest in the house incident to the divorce, she took his adjusted basis in the property pursuant to section 1041(b)(2).3 The total purchase price paid by petitioner and her 2SEC. 1012. BASIS OF PROPERTY--COST. The basis of property shall be the cost of such property, except as otherwise provide

Section 1012 provides that a taxpayer generally has a basis in property equal to its cost. Cost is defined as "the amount paid for such property in cash or other property." Sec. 1.1012-1(a), Income Tax Regs. Under the circumstances present here, cost means the amount paid by petitioners. Detroit Edison Co. v. Commissioner, 319 U.S. 98, 102 (1943);

Section 1012 provides that the basis of property is the cost of the property. A shareholder's basis in his shares of - 12 - corporate stock is equal to the amount paid for the stock. Estate of Leavitt v. Commissioner, 90 T.C. 206, 212 (1988), affd. 875 F.2d 420 (4th Cir. 1989); Uri v. Commissioner, T.C. Memo. 1989-58, affd. 949 F.2d 371 (10th Cir.

Section 1012 provides that the basis of property shall be the cost of such property. Under the circumstances present here, "cost", for purposes of the Code, means the amount paid by petitioner. Detroit Edison Co. v. Commissioner, 319 U.S. 98, 102 (1943); Borg v. Commissioner, 50 T.C. 257, 263 (1968). Petitioner did not provide respondent with any e

1.1012-1(a), Income Tax Regs. There is nothing about the $19,000 in payments to family members to suggest that such payments be allocated to the cost basis of the stock. The $19,000 was paid to family members who had no ownership interests in the Solectron stock. Accordingly, we hold that the Solectron stock basis is $10,000, as rep

Section 1012 provides that a taxpayer generally has a basis in property equal to its cost. Petitioner bears the burden of demonstrating that he is entitled to a basis in the automobiles - 24 - in excess of that determined by respondent. Rule 142(a); Burnet v. Houston, 283 U.S. 223, 227-228 (1931). Petitioner has not presented any documentation to

As pertinent here, section 1011(a) defines the term "adjusted basis" as the basis determined under section 1012, adjusted as provided under section 1016, and section 1012 provides that the basis of property is its cost.

Section 1012 provides that the basis of property is the cost of the property. A shareholder's basis in his shares of - 12 - corporate stock is equal to the amount paid for the stock. Estate of Leavitt v. Commissioner, 90 T.C. 206, 212 (1988), affd. 875 F.2d 420 (4th Cir. 1989); Uri v. Commissioner, T.C. Memo. 1989-58, affd. 949 F.2d 371 (10th Cir.

As pertinent here, section 1011(a) defines the term "adjusted basis" as the basis determined under section 1012, adjusted as provided in section 1016, and section 1012 provides that the basis of property is its cost.

1012; Simmonds Precision Prods. v. Commissioner, 75 T.C. 103, 115 (1980). Expenses incurred in the transaction are also properly included in basis. Sec. 1016(a).5 We applied this general rule in the similar situation presented in International Telephone & Telegraph v. Commissioner, supra, wherein we held the debentures had a basis to ITT equal

titioner bears the burden of proving that it is entitled to the additional - 8 - $3,081,584 in basis. Rule 142(a);5 Welch v. Helvering, 290 U.S. 111, 115 (1933). The basis upon which depreciation deductions are allowed is the basis determined under section 1012. Secs. 167(g), 1011(a). Section 1012 provides in pertinent part: "The basis of property shall be the cost of such property". Generally, the cost basis of property purchased with other property is the fair market value of the property rece

This Court has looked to section 1012 when defining "basis" for purposes of a shareholder's stock in an S corporation.

* * * * * * * Knowing that services (labor) are property * * * , nothing excludes services from the provisions of § 1012[4] as a cost that must be restored to the 3 Sec.

Except as otherwise provided in subchapters C, K, and P, the adjusted basis of property is the property’s basis, determined under section 1012, adjusted as provided in section 1016.

Regulation by State law; Federal law relating specifically to insurance; applicability of certain Federal laws after June 30, 1948 (a) State regulation— The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business. (b) Federal regu

Howard would have received a cost basis in the receivables under section 1012, as opposed to the significantly larger basis claimed to be transferred from Santa Barbara through XBOXT and then to PIMLICO under section 721.

That section provides that “the direct costs of such property” and “such property’s proper share of those indirect costs .

§ 1012; Estate of Leavitt v. Commissioner, 90 T.C. 206, 212 (1988), aff’d, 875 F.2d 420 (4th Cir. 1989). A taxpayer must increase his or her basis in S corporation stock by, among other things, the amount of his or her distributive share of corporate income. § 1367(a)(1). A taxpayer also increases basis by the excess of the deductions for depletion

Adjusted basis is typically what a property owner paid for the property plus what he later spent to improve it, minus allowed or allowable depreciation. §§ 1011(a), 1012(a), 1016; see also Simonsen v. Commissioner, 150 T.C. 201, 213 (2018). Gain is the amount the seller receives reduced by the seller’s adjusted basis in the property. See §

erm capital gain is taxed as ordi- nary income. See §§ 1(a), (h)(1), 1222(1) (defining short-term capital gain). 11 [*11] corn and soybeans. First, they contend that they sold the crops to the CRATS, so that the CRATs acquired a “cost basis” under section 1012. This argument does not pass the straight-face test. As evidenced by the filing of gift tax returns, petitioners contributed the crops to the CRATs. There is no evidence that the CRATs, which had no assets be- fore the crops were transferr

The basis of property contributed to a partnership by a partner is the adjusted basis of the property to the contributing partner at the time of the contribution (adjusted for any gain recognized by the contributing partner). § 723. In the case of intangible assets, basis includes amounts that are required to be capitalized, such as amounts

§ 1367(a); see also Gleason v.

e signed and made payable to RLC for its stock. These notes are the only source of basis that Ryder has ever claimed. - 139 - [*139] The problem for Ryder is that paper promises not backed by cash don’t create basis. Basis is the cost of property, sec. 1012, and a shareholder gets basis in his shares in a corporation when he purchases those shares or contributes capital to that corporation, secs. 351(a), 358(a)(1); see also Maguire v. Commissioner, T.C. Memo. 2012-160, 2012 WL 2036153, at *4. Fo

e signed and made payable to RLC for its stock. These notes are the only source of basis that Ryder has ever claimed. - 139 - [*139] The problem for Ryder is that paper promises not backed by cash don’t create basis. Basis is the cost of property, sec. 1012, and a shareholder gets basis in his shares in a corporation when he purchases those shares or contributes capital to that corporation, secs. 351(a), 358(a)(1); see also Maguire v. Commissioner, T.C. Memo. 2012-160, 2012 WL 2036153, at *4. Fo

e signed and made payable to RLC for its stock. These notes are the only source of basis that Ryder has ever claimed. - 139 - [*139] The problem for Ryder is that paper promises not backed by cash don’t create basis. Basis is the cost of property, sec. 1012, and a shareholder gets basis in his shares in a corporation when he purchases those shares or contributes capital to that corporation, secs. 351(a), 358(a)(1); see also Maguire v. Commissioner, T.C. Memo. 2012-160, 2012 WL 2036153, at *4. Fo

e signed and made payable to RLC for its stock. These notes are the only source of basis that Ryder has ever claimed. - 139 - [*139] The problem for Ryder is that paper promises not backed by cash don’t create basis. Basis is the cost of property, sec. 1012, and a shareholder gets basis in his shares in a corporation when he purchases those shares or contributes capital to that corporation, secs. 351(a), 358(a)(1); see also Maguire v. Commissioner, T.C. Memo. 2012-160, 2012 WL 2036153, at *4. Fo

e signed and made payable to RLC for its stock. These notes are the only source of basis that Ryder has ever claimed. - 139 - [*139] The problem for Ryder is that paper promises not backed by cash don’t create basis. Basis is the cost of property, sec. 1012, and a shareholder gets basis in his shares in a corporation when he purchases those shares or contributes capital to that corporation, secs. 351(a), 358(a)(1); see also Maguire v. Commissioner, T.C. Memo. 2012-160, 2012 WL 2036153, at *4. Fo

1012; Phillips Petroleum Co. v. Commissioner, 104 T.C. 256, 308 (1995) ("Actual sales are generally the best evidence offair market value."). When a taxpayer claims a charitable contribution deduction for recently purchased property, a wide gap between cost basis and claimed value raises a red flag suggesting that the return merits examination

Amount ofDeduction Section 166(b) provides that the "amount ofthe deduction for any bad debt shall be the adjusted basis provided in section 1011 for determining the loss from the sale or other disposition ofproperty." Section 1011 cross-refers to section 1012, which provides that the basis ofproperty is generally its cost.

But petitioner simply refused to participate in the process and supplied no evidentiary material ofany sort. As the faculty director ofthe Harvard Trial Advocacy Workshop, petitionerpresumably appreciated that a failure to submit evidence may have adverse consequences. One ofthose consequences here is that he is foreclosed from disputing

92 - But the Code doesn't require a founding shareholder to take as his basis what he hopes the earnings on his investment will be--it requires him to take as his basis only the cost or amount ofwhatever he contributed. Secs. 351, 358(a); see also sec. 1012 (basis is cost). And the Code certainly doesn't treat his corporation as a sole proprietorship ifit turns out to be profitable. What the Mazzeis' Roth IRAs paid for the FSC stock is meaningless--which might be why the Commissioner didn't cha

1012; Phillips Petroleum Co. v. Commissioner, 104 T.C. 256, 308 (1995) ("Actual sales are generally the best evidence offair market value[.]"). When a taxpayer claims a charitable con- tribution deduction for recently purchased property, a wide gap between cost basis and claimed value raises a red flag suggesting that the return merits examina

-17- [*17] purchases an interest in a partnership that holds appreciated property and takes that partnership interest with a cost basis under section 1012, the transferee partner's outside basis will exceed its share ofthe partnership's inside asset basis.

92 - But the Code doesn't require a founding shareholder to take as his basis what he hopes the earnings on his investment will be--it requires him to take as his basis only the cost or amount ofwhatever he contributed. Secs. 351, 358(a); see also sec. 1012 (basis is cost). And the Code certainly doesn't treat his corporation as a sole proprietorship ifit turns out to be profitable. What the Mazzeis' Roth IRAs paid for the FSC stock is meaningless--which might be why the Commissioner didn't cha

When taxpayers sell shares ofstock, they must compute their tax gain or loss by finding the difference between their cost basis and amount realized. Sec. 1001(a). As a general rule, when taxpayers hold multiple lots or shares ofidentical stock, they must compute their gains or losses against the basis ofthose shares actually sold, not th

Section 1001(b) provides that the amount realized from the sale ofproperty is the sum ofany money received plus the fair market value ofproperty other than money that is received.

uivalent exemptions to U.S. 4The Tax Reform Act of 1986 (1986 Act), Pub. L. No. 99-514, sec. 1212, 100 Stat. at 2536, as applicable here, was thereafter amended by Congress in the Technical and Miscellaneous Revenue Act of 1988, Pub. L. No. 100-647, sec. 1012(e)(1), (2)(A), and (5), 102 Stat. at 3499-3500, and in the Omnibus Budget Reconciliation Act of 1989, Pub. L. No. 101-239, sec. 7811(i)(8)(D), and (10), 103 Stat. at 2411. Those amendments do not affect our resolution ofthe issue ofthe vali

debtor's adjusted basis in the property. Sec. 1001(a). In the case ofrecourse debt, the amount realized is the fair market value ofthe property repossessed. Frazier v. Commissioner, 111 T.C. 243, 245 (1998). In general, the debtor's basis is cost.6 Sec. 1012. The debtor's basis must be reduced by the amount ofdepreciation that was allowed or allowable during 2010 and 2011. Sec. 1016(a)(2). 6Respondent argued that petitioners' basis in the assets should not include any amount paid for the assets

The adjusted AMT basis is the exercise price, increased by the amount ofincome included in AMTI by reason ofthe exercise ofthe ISOs. Sec. 56(b)(3); Merlo v. Commissioner, 126 T.C. 205, 209-210 (2006), afÕl, 492 F.3d 618 (5th Cir. 2007). Section 53 allows a taxpayerto claim a credit for AMT paid in prior years, adjusted for specific items

Generally, where a portion ofa larger property is sold, the cost ofthe entire property is "equitably apportioned among the several parts." W.C. & A.N. Miller Dev. Co. v. Commis- sioner, 81 T.C. 619, 632 (1983); sec. 1.61-6(a), Income Tax Regs. The parties agree that "equitable apportionment" should nót be applied here and that petitioner

tion ofproperty is computedwith reference to the amount realized from the disposition ofthe property and the property's adjusted basis. See sec. 1001(a). In general, adjusted basis is - 10 - determined with reference to the cost ofthe property, see sec. 1012, adjusted as provided in section 1016. The transaction statements generated in connection with the stock petitioner acquired in the employee stock plan show the acquisition and the disposition of the stock that petitioner acquired as a parti

torial income tax returns and pay tax in the Virgin Islands were enacted as part ofthe Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1274(a), 100 Stat. 2596, and amended in the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647, sec. 1012(w), 102 Stat. 3530. Virgin Islands residents generally were exempted from Federal income tax obligations ifthey met the requirements ofsection 932(c): SEC. 932. COORDINATION OF UNITED STATES AND VIRGIN ISLANDS INCOME TAXES. (c) Treatment ofVi

torial income tax returns and pay tax in the Virgin Islands were enacted as part ofthe Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 1274(a), 100 Stat. 2596, and amended in the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647, sec. 1012(w), 102 Stat. 3530. Virgin Islands residents generally were exempted from Federal income tax obligations ifthey met the requirements ofsection 932(c): SEC. 932. COORDINATION OF UNITED STATES AND VIRGIN ISLANDS INCOME TAXES. (c) Treatment ofVi

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

, aff'd, 180 F.2d 140 (8th Cir. 1950). Section 1011 provides that a taxpayer's adjusted basis for determiningthe gain or loss from the sale or other disposition ofproperty shall be its cost, adjusted to the extent provided in section 1016. See also sec. 1012. A property's cost is - 7 - [*7] "the amount paid for such property in cash or other property." Sec. 1.1012-1(a), Income Tax Regs. The term "cost" includes "any indebtedness to the seller for the purchase price ofthe property and any indebte

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

Capital Gain Section 1001(a) provides that "[t]he gain from the sale or other disposition ofproperty shall be the excess ofthe amount realized therefrom over the adjusted basis provided in section 1011 for determining gain".

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ders sell their stockto a third party, the C corporation continues to own its appreciated assets, and the corporate-level built-in gain is not triggered. Generally, buyers preferto purchase assets and receive a new basis equal to the purchase price, sec. 1012, whereas sellers disfavorthe sale ofassets because ofthe attendant corporate level tax. Because a stock sale merely defers the corporate level tax liability, however, a stock sale generally commands a lower sale price than an asset sale. -

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

ip under section 721; (3) whetherthe retailers' claimed contributions to and subsequentredemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale ofthe receivables, such thatthe receivables had a cost basis under section 1012 rather than a carryoverbasis under section 723; (4) whetherthe 2004 partnership transactions had economic substance; (5) whetherthe 2004 partnership transactions satisfied the statutoryprerequisites for a section 166 deduction; (6) whethe

under section 721; (3) whether the retailers’ claimed contributions to and subsequent redemptions from Sugarloaf should be collapsed into a single transaction and treated as a sale of the receivables, such that the receivables had a cost basis under section 1012 rather than a carryover basis under section 723; (4) whether the 2004 partnership transactions had economic substance; (5) whether the 2004 partnership transactions satisfied the statutory prerequisites for a section 166 deduction; (6) w

n."). In addition to the general rules for determi ing basis (i.e., those found in section 1011), there are spec al iules that require arinual Ädjüstments to thè 3(...continued) °A corporat d bt obligatión should be property" for the purposes ofIRC § 1012. James S. Eustice & Joel D. I untz, Federal Income Taxation ofS Corporations, par. 9 02 & n.20, 9.02[1] b] 1.30 (4th ed. 2001). - 15 - [*15] shareholéler's adjusted basis ofstock ofan S corporation and to the shareholder's adjusted basis ofdebt

the amount he realized from its sale. Section 1011 provides that a taxpayer's adjusted basis for determining the gain or loss from the sale or other disposition ofproperty shall be its cost, adjusted to the extent provided in section 1016. See also sec. 1012. A property's cost is "the amount paid for such property in cash or other property." Sec. 1.1012-1(a), Income Tax Regs. The term "cost" includes "any indebtedness to the seller for the purchase price ofthe property and any indebtedness to a

t petitioner does not meet the requirements ofsection 932(c)(4)(B) (that he did not "The residual U.S. tax liability was emphasized by the 1988 amendment to the TRA in the Technical and Miscellaneous Revenue Act of 1988 (TAMRA), Pub. L. No. 100-647, sec. 1012(w)(3), 102 Stat. at 3530. Sec. 932(c)(2) originally provided that an individual affected by subsection (c) "shall file his income tax return for the taxable year with the Virgin Islands." This was changed in 1988 to "shall file an income ta

After the $2,965,000 capital contribution to the management òompany, petitioners' tax bases in their management company stock were approximately equal to the $2,969,000 claimed loss deduction that arose from the management company's payment ofthe deferred compensation. On audit, respondent relied alternatively on sec. 482 to reallocate t

1.1012- 1(a), Income Tax Regs. The parties don't dispute that Gaggero's basis in the property before entering into the agreement with BCC was $689,000. But a taxpayer increases his adjusted basis by the cost ofimprovements that he made. - 35 - [*35] Sec. 1016(a)(1); sec. 1.1016-2(a), Income Tax Regs. The parties stipulated that by

After the $2,965,000 capital contribution to the management òompany, petitioners' tax bases in their management company stock were approximately equal to the $2,969,000 claimed loss deduction that arose from the management company's payment ofthe deferred compensation. On audit, respondent relied alternatively on sec. 482 to reallocate t

1011 (giving general rule that the adjusted basis is basis under section 1012 as adjusted by section 1016); sec.

Benedict's cost basis in the property was $320,000. Transfers of property -between an individual and a spouse, however, are treated as gifts, and the basis of the - 6 - transferee in the "gifted" property is the same as the adjusted basis of the transferor. Sec. 1041(a) and (b) . There is no evidence in:the record to show that the adjus

The amount realized on the sale or disposition is the amount of money received plus the fair.market value of any property received. Sec. 1001(b). Petitioner's adjusted basis in Walker Street was $43,000 reduced by the amount of depreciation allowed or allowable under subtitle A.4 .Sec. 1016(a) (2).s The amount 4Petitioner deducted $992 o

ls file income tax returns and pay tax in the Virgin Islands, were enacted as part of the Tax Reform Act of 1986, Pub. L. 99-514, sec. 1274(a), 100 Stat. 2596, and amended in the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647, sec 1012(w), 102 Stat. 3530. Virgin Islands residents were generally exempted from Federal income tax obligations if they met the requirements of section 932 (c) (4): (4) Residents of the Virgin Islands.--In the case of an individual-- (A) who is a bona f

2008-46 (the basis of property, under section 1012, is generally defined as,cost and that cost is adjusted pursuant to section 1016) ; see also Kikalos v .

If property is acquired from a decedent, however, the basis is the property's fair market value at the date of the decedent's death, unless the alternate valuation date is elected. Sec. 1014(a). Where property is acquired by gift, the basis is the same in the hands of the donee as it was in the hands of the donor, except that, if the bas

1012-1(a), Income Tax Regs . Legal fees incurred in the acquisition or disposition of a capital asset are to be treated as capital expenditures and are to be "added to the basis-of the capital asset with respect to which they are incurred." Woodward v. Commissioner., 397 U .S . 572, 574-575 (1970) ; Berry Petroleum Co .-& Subs . v . Commission

Park Amusement Co. v. United States, 130 Ct. Cl. 166, 126 F. Supp. 184, 189 (1964). Including as tit. XI of the report, from the Committee on Ways and Means, an explanation of the revenue provisions of the accompanying bill, which, among other things, added sec. 1031(0. In Teruya Bros., Ltd. & Subs. v. Commissioner, 124 T.C. 45, 5

capital expenditures, which are not deductible, sec. 263(a)(1), regardless of the number of payments made or the total amount to be paid, Perkins v. United States, supra at 775. The payments give the taxpayer a cost basis in the acquired property, sec. 1012, and the taxpayer recovers his investment in the property by way of deductions for depreciation, sec. 167(a), or by way of an offset of any unrecovered basis against the amount realized on a sale or disposition of the property, sec. 1001(a).

§ 1012 and the authorities thereunder * * 12. An issue concerning the cost basis of prop- erty in the hands of the taxpayer, pre-contribution, inevitably turns on law and facts unique to the tax- payer and the particular property in question, which are the hallmark of "nonpartnership items ." * * * To consider issues "peculiar to a single partner"

As regards basis, section 1012 sets forth the foundational principle that the basis of property for tax purposes shall be the cost of the property.

The adjusted AMT basis is the exercise price increased by the amount of income included in AMTI by reason of the exercise of ISOs. Sec. 56(b)(3); Merlo v. Commissioner, supra at 209-210. With respect to the 30,297 Veritas shares sold in 2001, petitioners had a regular tax basis of $127,920, the exercise price. Petitioners had an adjusted

§ 1012 and the authorities thereunder * * *. 12. An issue concerning the cost basis of property in the hands of the taxpayer, pre-contribution, inevitably turns on law and facts unique to the taxpayer and the particular property in question, which are the hallmark of “nonpartnership items.” * * * To consider issues “peculiar to a single partner” as

However, for AMT purposes, section 56(b)(3) provides that the adjusted basis of any stock acquired by the exercise of an ISO “shall be determined on the basis of the treatment prescribed by this paragraph.” Thus, the taxpayer will increase his adjusted AMT basis by the amount of income included in his AMTI. See secs. 55(b)(2), 56(b)(3),

The basis of property acquired by gift is the same as it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift. If such basis is greater than the fair market value of the property at the time of the gift, however, the basis for determining loss is the fair market value of the property. Sec. 10

As regards basis, section 1012 sets forth the foundational principle that the basis of property for tax purposes shall be the cost of the property.

However, for AMT purposes, section 56(b)(3) provides that the adjusted basis of any stock acquired by the exercise of an iso “shall be determined on the basis of the treatment prescribed by this paragraph.” Thus, the taxpayer will increase his adjusted AMT basis by the amount of income included in his AMTI. See secs. 55(b)(2), 56(b)(3),

However, for amt purposes, section 56(b)(3) provides that the adjusted basis of any stock acquired by the exercise of an ISO “shall be determined on the basis of the treatment prescribed by this paragraph.” In other words, a taxpayer’s adjusted AMT basis equals the exercise or cost basis in the shares increased by the amount of income in

The buyer would only have taxable gain on the disposition of the marketable securities to the extent they appreciated in value subsequent to the time of acquisition. There'fore, the buyer would be willing to pay the - 30 - full fair market value for the securities without any discount. We agree with the Fifth Circuit that "correctly app

Commissioner, T.C. Memo. 1997-532, affd. 199 F.3d 440 (5th Cir. 1999). Respondent contends that petitioners have failed to substantiate a cost basis in their residence above the $163,148 determined by respondent at trial and that petitioners therefore in 2000 realized $126,852 in capital gain on the sale.6 With one exception not

For the reasons that follow, we do not find petitioner’s wife’s testimony as to the origin of the securities in petitioner’s hands to be credible, and we give it no weight. First, her testimony was self-serving (in that we assume, as petitioner’s wife, she has an economic stake in the outcome of this case). We need not accept self-servin

"Cost" is defined as the "amount paid" for property "in cash or other property." Sec. 1.1012-1(a), Income Tax Regs. - 8 - 1324 (llth Cir. 1999); Underwood v. Commissioner, 63 T.C. 468, 477 (1975),. affd. 535 F.2d 309 (5th Cir. 1976); Prashker v. Commissioner, 59 T.C. 172 (1972); Perry v. Commissioner, 54 T.C. 1293, 1296 (1970), affd. 39

Commissioner, T.C. Memo. 1997-532, affd. 199 F.3d 440 (5th Cir. 1999). Respondent contends that petitioners have failed to substantiate a cost basis in their residence above the $163,148 determined by respondent at trial and that petitioners therefore in 2000 realized $126,852 in capital gain on the sale.6 With one exception not

Commissioner, T.C. Memo. 1997-532, affd. 199 F.3d 440 (5th Cir. 1999). Respondent contends that petitioners have failed to substantiate a cost basis in their residence above the $163,148 determined by respondent at trial and that petitioners therefore in 2000 realized $126,852 in capital gain on the sale.6 With one exception not

affd. 180 F.2d 140 (8th Cir. 1950). Section 1011 provides that a taxpayer’s adjusted basis for determining the gain or loss from the sale or other disposition of property shall be its cost, adjusted to the extent provided by section 1016. See also sec. 1012. Under section 1016(a)(1), the basis of property must be adjusted for expenditures, receipts, losses, or other items, properly chargeable to capital account. The cost of improvements and betterments made to a taxpayer’s property are among th

The buyer would only have taxable gain on the disposition of the marketable securities to the extent they appreciated in value subsequent to the time of acquisition. Therefore, the buyer would be willing to pay the full fair market value for the securities without any discount. We agree with the Fifth Circuit that “correctly applying the

The basis of inherited property ordinarily is the fair market value of the property at the date of the decedent's death. Sec. 1014. The basis of property acquired by gift is the same as it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift, except that if such basis is greater than the fair

As pertinent here, section 1011(a) defines the term "adjusted basis" as the basis determined under section 1012, adjusted as provided under section 1016, and section 1012 pro- vides that the basis of property is its cost.

The adjusted basis for determining gain from the sale of property, whenever acquired, shall be the basis determined under section 1012 and adjusted as provided in section 1016.

In two written stipulations, all of the issues have been settled except the following: (1) The amount of petitioner's basis, under section 1012, in stock of General Electric Co.

Under section 1.1011-1, Income Tax Regs., adjusted basis is the cost or other basis of property under section 1012, adjusted to reflect allowable deductions for depreciation under section 1016.

Section 1011(a) provides that the adjusted basis for determining gain or loss from the sale or other disposition of property is the basis determined under section 1012, adjusted as provided in section 1016.

We agree with respondent that section 1016(a)(2) requires a decrease in petitioners’ basis in the condo, determined under section 1012 (i.e., the cost), for depreciation allowed or allowable, whichever is greater, under section 167(a).

1012 (basis of property is cost); Gertz v. Commissioner, 64 T.C. 598 (1975) (disallowing bad debt deduction for unpaid wages that were never included in income). Petitioners offered no evidence, other than Mr. Farnsworth’s self-serving testimony, to show that Mr. Farnsworth previously included the retention amounts in income. - 15 - Responden

1012 (aa)(4), 102 Stat. 3532. Thus, the Third Protocol specifically takes into account, as the taxes to which the convention shall apply, the alternative minimum tax as amended by the Tax Reform Act of 1986, including the limitation on the alternative minimum tax foreign tax credit imposed by section 59(a)(2). Accordingly, we find that there i

The adjusted cost basis under section 1011 for determining gain or loss from the sale of property is the cost basis or other basis determined under section 1012 adjusted as provided by section 1016.

Under section 1.1011-1, Income Tax Regs., adjusted basis is the cost or other basis of property under section 1012, adjusted to reflect allowable deductions for depreciation under section 1016.

the record indicates petitioner and Mr. Anthony elected to have sec. 1041 apply to the post-1983 transfer. See Deficit Reduction Act of 1984, Pub. L. 98-369, sec. 421, 98 Stat. 793. - 7 - interest which is deemed to have been sold to her. See id.; sec. 1012. Respondent, assuming the division of property upon divorce was an equal but taxable division, made the following determination of the amount of gain on the sale of the Compton residence: Selling price $119,000 Selling expenses (16,852) Adju

Furthermore, the tax returns filed on behalf of each partnership compute the partnership's cost basis for each property under section 1012 as the contract price of the property less the rental deficit contribution for that property and claim depreciation on the portion of the cost that was allocated to the improvements.

As pertinent here, (1) petitioner’s adjusted basis in determining the gain or the loss from the sale of the Church Street property is his basis in that property determined under section 1012, adjusted as provided in section 1016,88 see sec.

Furthermore, the tax returns filed on behalf of each partnership compute the partnership's cost basis for each property under section 1012 as the contract price of the property less the rental deficit contribution for that property and claim depreciation on the portion of the cost that was allocated to the improvements.

Distributions by S corporations without accumulated earnings and profits, on the other hand, decrease the shareholders’ bases in their stock in the corporations. See sec. 1367(a)(2)(A). Under section 165, taxpayers may take deductions for losses sustained in sales or exchanges of capital assets and for worthless securities. See sec. 165(

General Dynamics Corp., supra at 243.] The all-events test also applies under section 1012 to the accrual into the tax bases of capital assets of estimated future capital costs.

1012; Better Beverages, Inc. v. United States, 619 F.2d 424, 428 (5th Cir. 1980); Winn-Dixie Montgomery, Inc. v. United States, 444 F.2d 677, 683-684 (5th Cir. 1971). Future contract value is not the cost of the two outdoor signs.4 There is no evidence of the 4 Future contract value is not a proper grounds for computing gain. See sec. 1012; Be

Adjusted basis is determined by making certain adjustments to cost basis. See sec. 1016. Section 1367 provides additional, special rules with respect to adjusting basis in an S corporation investment. The disagreement between the parties concerns only petitioner's cost basis in his Wedgewood investment. The parties disagree as to whether

ich was designated sec. 167(g) in 1979 and 1982), specifies the basis for depreciation of any property "shall be the adjusted basis provided in section 1011, for the purpose of determining the gain on the sale or other disposition of such property." Sec. 1012, when read with sec. 1011, provides that the adjusted basis of the property is its "cost". If the purchase price of a patent is expressed by formula by which a fixed dollar amount cannot be ascertained until future years, such as a purchase

1.162- 12(a), Income Tax Regs. Cost incurred to raise livestock may be deducted or capitalized at the option of the taxpayer. See sec. 1.162-12(a), Income Tax Regs. In contrast, under the applicable version of the controlling regulation, the cost of acquiring, as opposed to raising, a sporting animal, such as a race horse, is consid

ich was designated sec. 167(g) in 1979 and 1982), specifies the basis for depreciation of any property "shall be the adjusted basis provided in section 1011, for the purpose of determining the gain on the sale or other disposition of such property." Sec. 1012, when read with sec. 1011, provides that the adjusted basis of the property is its "cost". If the purchase price of a patent is expressed by formula by which a fixed dollar amount cannot be ascertained until future years, such as a purchase

General Dynamics Corp., supra at 243.] The all-events test also applies under section 1012 to the accrual into the tax bases of capital assets of estimated future capital costs.

Section 1012 provi es that the basis of property is the cost of the property an under section 362(a) such basis in a transferor carries over tó a corporation where such property is contributed tö the corporation for stock under section 351. The transaction involved here is a classic .xample of loss- buyirig. It was a premeditated and abusive tax s

nded a total of $40,359 during 1985 and 1986 to acquire and convert the bus into a motor home; however, they claimed only $18,517 in total depreciation from 1985 through 1989.5 Pursuant to section 1011(a), the adjusted basis for determining the gain or loss from the sale or other disposition of property is the cost of the property determined under section 1012 adjusted as provided in section 1016.

Generally, under section 1012, the basis of property is its cost.

Commissioner, 92 T.C. 1027, 1038 (1989); sec. 1.1012-1(c), Income Tax Regs. Petitioner is a certified public accountant, and the record shows that he is aware that gain on the sale of stock represents the amount received over the basis.7 See sec. 1001(a). Despite repeated invitations by respondent and by the Court to prove his ba

ed from dealings in property. See sec. 61(a)(3). The gain from the sale of property is the excess of the amount realized over the taxpayer's adjusted basis in the property. See sec. 1001(a). Generally, the adjusted basis in property is its cost, see sec. 1012, and the expenses of the sale reduce its sale price, see, e.g., Southern Pac. Transp. Co. v. Commissioner, 75 T.C. 497, 586 n.86 (1980) (and the cases cited therein); see also Lanrao, Inc. v. United States, 422 F.2d 481 (6th Cir. 1970). Pet

167(g).32 Pursuant to section 1011(a), the adjusted basis for determining the gain or loss from the sale or other disposition of property is the cost of the property determined under section 1012 (with certain exceptions not material here) adjusted as provided in section 1016.

167(g).32 Pursuant to section 1011(a), the adjusted basis for determining the gain or loss from the sale or other disposition of property is the cost of the property determined under section 1012 (with certain exceptions not material here) adjusted as provided in section 1016.

n 6661(a) provides for an addition to tax of “25 percent of the amount of any underpayment attributable” to “a substantial understatement of income tax for any taxable year”, for 34 We note the recent debate over the amendment to sec. 355 enacted in sec. 1012, Taxpayer Relief Act of 1997, Pub. L. 105- 34, 111 Stat. 788, 914. - 68 - penalties assessed after October 21, 1986. Section 6661(b)(1) defines a substantial understatement as any understatement that exceeds the greater of $10,000 in the ca

Pursuant to section 1011(a), the adjusted basis for determining the gain or loss from the sale or other disposition of property is the cost of the property determined under section 1012 (with certain exceptions not material here) adjusted as provided in section 1016.

Respondent next argues that petitioners have failed to establish when the cattle were placed in service. Petitioners argue that it is not significant when the cattle were placed in service if it occurred within the taxable year 1978. Upon consideration, we are not persuaded by either argument in its entirety. The majority of the cattle w

Section 1012 sets forth the general rule that the basis of property shall be the cost of such property. Additionally, section 1060 sets forth special allocation rules for determining a transferee's basis in certain asset acquisitions. Section 1060 was added to the Internal Revenue Code in 1986, Tax Reform Act of 1986, Pub. L. 99-514, sec. 641(a), 1

The Supreme Court in Crane v. Commissioner, 331 U.S. 1 (1947), established that the cost basis of an asset includes nonrecourse indebtedness borrowed to purchase the asset. See Mayerson v. Commissioner, 47 T.C. 340, 351-352 (1966). The Internal Revenue Code provides that the basis is to be adjusted to take into account certain factors, s

1.1012-1(a), Income Tax Regs. In this instance, petitioners bear the burden of proving petitioner's basis in the demand note. Rule 142(a). Petitioners indicated a cost basis in the demand note in the amount of $11,400. At trial, petitioner explained that he was entitled to increase his basis in the demand note for - 10 - "opportuni

The basis is adjusted for the costs of improvements and betterments made to the property. Sec. 1016(a)(1); sec. 1.1016-2(a), Income Tax Regs. Petitioners paid $300,000 for 137 acres of the Antioch property and sold 117 acres of the property in the transaction at issue in this case. Petitioners' original basis in the 117 acres, based on t

The basis is adjusted for the costs of improvements and betterments made to the property. Sec. 1016(a)(1); sec. 1.1016-2(a), Income Tax Regs. Petitioners paid $300,000 for 137 acres of the Antioch property and sold 117 acres of the property in the transaction at issue in this case. Petitioners' original basis in the 117 acres, based on t

.8] We conclude that section 1.936-6(b)(1) Q&A-12, Income Tax Regs., establishes a permissible method for computing CTI where 8Sec. 936(h)(7) was redesignated as sec. 936(h)(8) by the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647, sec. 1012(h)(2)(B), 102 Stat. 3502. - 38 - the possession product is a component product. In evaluating the regulations under section 936, we are mindful of the Supreme Court's admonition: "The choice among reasonable interpretations is for the Commi

Sections 274(g) and 512(g) were incorporated into the Internal Revenue Code of 1939 by section 272(g) (relating to the income tax) and section 1012(g) (relating to the gift tax); again no comparable section was included in the estate tax provisions of the 1939 Code.

Act), Pub. L. 99-514, sec. 1214 (c)(5) and (d)(1), 100 Stat. 2543.23 In the instant case, the interest from U.S. and foreign banks was paid by LTD to its clients during the calendar years 1984 through 1989. Source rules for interest are generally 23 Sec. 1012(g)(1) of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647, 102 Stat. 3500, retroactively provided the effective date of the Tax Reform Act of 1986 (1986 Act), Pub. L. 99-514, sec. 1214(c)(5), 100 Stat. 2543, as if includ

Act), Pub. L. 99-514, sec. 1214 (c)(5) and (d)(1), 100 Stat. 2543.23 In the instant case, the interest from U.S. and foreign banks was paid by LTD to its clients during the calendar years 1984 through 1989. Source rules for interest are generally 23 Sec. 1012(g)(1) of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647, 102 Stat. 3500, retroactively provided the effective date of the Tax Reform Act of 1986 (1986 Act), Pub. L. 99-514, sec. 1214(c)(5), 100 Stat. 2543, as if includ

The amount he paid includes cash and other property given in exchange for the property and any liabilities petitioner assumed or to which the property is subject. Commissioner v. Tufts, 461 U.S. 300, 307 (1983); Crane v. Commissioner, 331 U.S. 1, 11 (1947). Petitioner bought 34,900 shares of Texana Capital stock for $199,600 on December

The "adjusted basis" of property exchanged is the property's unadjusted basis (e.g., section 1012 cost basis) adjusted as provided in section 1016 (e.g., reduced for depreciation allowable).

Sections 274(g) and 512(g) were incorporated into the Internal Revenue Code of 1939 by section 272(g) (relating to the income tax) and section 1012(g) (relating to the gift tax); again no comparable section was included in the estate tax provisions of the 1939 Code.

In fact, to the extent that any of the testimony at trial herein or any of the exhibits admitted into evidence touched upon it at all, it was strongly suggested that petitioner had no cost basis in the various ventures in any amount. (3) As to the additional capital losses claimed by petitioners as an offset, and more, to the capital gai

Thus, the amended petition alleges in part as follows: During the years of 1990, 1991, and 1992 the Petitioner did in fact receive payment for services actually rendered in a fair market value exchange under 26 USC §83, §1001, §1011 and §1012 not comprising taxable income, said acts performed as Unalienable rights to life, liberty, pursue happiness and acquire property, with labor being property.

Thus, the amended petition alleges in part as follows: During the years of 1990, 1991, and 1992 the Petitioner did in fact receive payment for services actually rendered in a fair market value exchange under 26 USC §83, §1001, §1011 and §1012 not comprising taxable income, said acts performed as Unalienable rights to life, liberty, pursue happiness and acquire property, with labor being property.

1012(aa)(4) of TAMRA. Since the year at issue in this case is 1987, the provisions are applied retroactively to petitioner. The Court finds that this period of retroactivity is a modest one and does not violate petitioner's right of due process. Tate & Lyle v. Commissioner, 103 T.C. 656, 675 (1994) (quoting U.S. v. Carlton, 512 U.S. ___, ___,

1012; Simmonds Precision Prods. v. Commissioner, 75 T.C. 103, 115 (1980). Expenses incurred in the transaction are also properly included in basis. Sec. 1016(a). We applied this general rule in the similar situation presented in International Telephone & Telegraph v. Commissioner, supra, wherein we held the debentures had a basis to ITT equal