IDAPA 35.01.01.480 — PROPERTY FACTOR: VALUATION OF OWNED PROPERTY (RULE 480)

Section 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.
(4-6-23)
02.
Examples.
(4-6-23)
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.
(4-6-23)
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).
(4-6-23)
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.
(4-6-23)
04.
Inventory. Inventory is to be included in the factor according to the valuation method used for
federal income tax purposes.
(4-6-23)
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.
(4-6-23)
IDAHO ADMINISTRATIVE CODE
IDAPA 35.01.01
Idaho State Tax Commission
Income Tax Administrative Rules
Section 485
Page 66