denominator of its property factor in accordance with its regular accounting practices shall be included in the numerator according to the location of destination. The value of mobile or movable property such as construction equipment, trucks or leased electronic equipment which are located within and without Philadelphia during the income period shall be determined for the purposes of the numerator of the factor on the basis of total time within Philadelphia during the income period. An automobile assigned to a traveling employee shall be included in the numerator if the employee's compensation is included in the numerator of the payroll factor.
Denominator. The denominator of the property factor shall include the average value of the real and tangible personal property owned or rented by the taxpayer everywhere. This amount shall be determined pursuant to the same procedures used to calculate the numerator.
Valuation of Property.
Valuation of Owned Property. 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 or abandonment, etc., provided that any taxpayer subject to the jurisdiction of a regulatory agency shall determine the original cost of its property in accordance with the system of accounts prescribed by the regulatory agency for such taxpayer.
If the 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.
Inventory of stock of goods shall be included in the factor in accordance with the valuation method used for federal income tax purposes.
Example (1): The taxpayer acquired a factory building in Philadelphia 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 includible 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 (2): 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 this merger, X Corporation owns a factory which X built five years earlier at a cost of $1,000,000. X has been depreciating the factor 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