CCA 200933029: Advice on deducting conveyed land and replacement-cost valuation

Plain-English summary

Chief Counsel Advice addressed whether the fair market value of land conveyed to the State of Alaska and a city could be deducted under section 162. It stated that the rationale of an earlier private letter ruling involving a Village Corporation appeared applicable to a transfer by a Regional Corporation. The advice also stated that the taxpayer's replacement-cost approach for valuing received property was consistent with applicable law and appeared permissible for all types of property.

Ruling snapshot

• Question: Could the taxpayer deduct the value of conveyed land and use a replacement-cost method to value received property?
• Outcome: Advice given
• Key authorities: IRC § 162; PLR 200147012

Full text (IRS public release)

ID: CCA_2009071018590958 Number: 200933029
Release Date: 8/14/2009
Office: ----------------
UILC: 162.00-00

From: -------------------------
Sent: Friday, July 10, 2009 6:59:11 PM
To: --------------------------------------
Cc: --------------------
Subject: Section 162 request for advice

This is to follow-up on our conversations regarding whether the FMV of lands conveyed to the State of Alaska and the City is deductible under § 162. We previously considered a similar issue in PLR 200147012 with regards to a Village Corporation. As we discussed, the rationale of PLR 200147012 would seem to be applicable to a transfer of land by a Regional Corporation.

You also asked whether the taxpayer’s “replacement cost” approach to valuing the property it received is permissible. As discussed, this approach is consistent with applicable law and appears to be permissible for all types of property.