Brief Fact Summary. Taxpayer was granted a 50-year franchise to operate a passenger railway in Fairmount Park, Philadelphia. A bridge was built by Taxpayer at a cost of $381,000. The bridge would be deeded to the city in exchange for a 10-year franchise extension.
Synopsis of Rule of Law. The cost basis of property received in a taxable exchange is the fair market value of the property received in the exchange.
Issue. May the taxpayer use the fair market value of the franchise extension on the date of the exchange as the cost basis?
Held. Judge Larimore issued the opinion for the Court of Claims of the United States in holding that taxpayer is entitled to use as the cost basis of the 10-year extension its fair market value as of the date of the exchange. The question of the value of the extended franchise is remanded for further consideration.
Concurrence. Judges Jones, Madden, Whitaker and Littleton concur.
Discussion. The Court of Claims found that the cost basis of the 10-year extension of the franchise was its fair market value on the date of the exchange. The value of the bridge or the extended franchise should be able to be determined with a reasonable degree of accuracy as well.