Section 35.01.01.480 - PROPERTY FACTOR: VALUATION OF OWNED PROPERTYSection 63-3027(16)(b), Idaho Code
01.In General. Property owned by a taxpayer is to 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 and adjusted by subsequent capital additions or improvements and partial disposition, by reason of sale, exchange, abandonment, etc. However, capitalized intangible drilling and development costs of producing property is to be included in the property factor whether or not they have been expensed for either federal or state tax purposes.02.Examples.a. A taxpayer acquired a factory building in Idaho at a cost of five hundred thousand dollars ($500,000). Eighteen (18) months later the taxpayer remodeled the building for a cost of one hundred thousand dollars ($100,000). The taxpayer files its return on the calendar year basis. The taxpayer claimed a depreciation deduction of twenty-two thousand dollars ($22,000) on its current year return. The value of the building included in the numerator and denominator of the property factor is six hundred thousand dollars ($600,000). The depreciation deduction is not taken into account in determining the value of the building for purposes of the factor.b. During the current taxable year, X Corporation merged into Y Corporation in a tax-free reorganization pursuant to the Internal Revenue Code. At the time of the merger, X Corporation owned a factory that it built five (5) years earlier at a cost of one million dollars ($1,000,000). X has been depreciating the factory at the rate of two percent (2%) per year. Its basis in X's hands at the time of the merger is nine hundred thousand dollars ($900,000). Since Y acquired the property in a tax-free transaction, Y includes the property in its property factor at X's original cost of one million dollars ($1,000,000).03.Unknown Original Cost. If the original cost of property cannot be determined, the property is included in the factor at its fair market value on the date it was acquired.04.Inventory. Inventory is to be included in the factor according to the valuation method used for federal income tax purposes.05.Gifts or Inheritance. Property acquired by gift or inheritance is to be included in the factor at its basis pursuant to the Internal Revenue Code.Idaho Admin. Code r. 35.01.01.480