Current through Register Vol. 63, No. 9, September 1, 2024
(1) Property owned by the taxpayer shall be
valued at its original cost. As a general rule "original cost" is deemed to be
the basis of the property for federal income tax purposes (prior to any federal
adjustments) at the time of acquisition by the taxpayer and adjusted by
subsequent capital additions or improvements thereto and partial disposition
thereof, by reason of sale, exchange, abandonment, etc.
Example (i): The taxpayer acquired a factory
building in this state at a cost of $500,000 and 18 months later expended
$100,000 for major remodeling of the building. Taxpayer files its return for
the current taxable year on the calendar year basis. Depreciation deduction in
the amount of $22,000 was claimed on the building for its return for the
current taxable year. The value of the building includable in the numerator and
denominator of the property factor is $600,000 as the depreciation deduction is
not taken into account in determining the value of the building for purposes of
the factor.
Example (ii): During
the current taxable year, X Corporation merges into Y Corporation in a tax-free
reorganization under the Internal Revenue Code. At the time of the merger, X
Corporation owns a factory which X built five years earlier at a cost of
$1,000,000. X has been depreciating the factory at the rate of two percent per
year, and its basis in X's hands at the time of the merger is $900,000. Since
the property is acquired by Y in a transaction in which, under the Internal
Revenue Code, its basis in Y's hands is the same as its basis in X's, Y
includes the property in Y's property factor at X's original cost, without
adjustment for depreciation, i.e., $1,000,000.
Example (iii): Corporation Y acquires the
assets of Corporation X in a liquidation by which Y is entitled to use its
stock cost as the basis of the X assets under Section 338 of the 1986 Internal
Revenue Code (i.e. stock possessing 80 percent of voting power and stock value
is purchased within a 12 month period.) Under these circumstances, Y's cost of
the assets is the purchase price of the X stock, prorated over the X
assets.
(2) If original
cost of property is unascertainable, the property is included in the factor at
its fair market value as of the date of acquisition by the taxpayer.
(3) Inventory of stock of goods shall be
included in the factor in accordance with the valuation method used for federal
income tax purposes. Payments for extracted natural resources shall be included
in the property factor as inventory.
(4) Property acquired by gift or inheritance
shall be included in the factor at its basis for determining depreciation for
federal income tax purposes.
Stat. Auth.: ORS
305.100
Stats. Implemented: ORS
314.655
