Oregon Department of Revenue

Rule Rule 150-314-0398
Property Factor; Valuation of Owned Property


(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.
Source

Last accessed
Jun. 8, 2021