Badger Pipe Line Company - Page 2

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               After concessions, the issue for decision is whether                   
          petitioner may deduct or must capitalize the expenses of                    
          relocating a portion of its pipeline.1                                      
               This case was submitted fully stipulated under Rule 122.2              
          The stipulation of facts, supplemental stipulation of facts, and            
          attached exhibits are incorporated herein by this reference.                
               Petitioner is a corporation, whose principal office was                
          located in Tulsa, Oklahoma, at the time the petition was filed.             
          It timely filed its 1991 tax return with the Internal Revenue               
          Service Center, Austin, Texas.                                              
               Petitioner operates a common carrier refined products                  
          pipeline system transporting refined petroleum products in the              
          States of Illinois, Indiana, and Wisconsin.  The system consists            
          of approximately 335 miles of pipeline.  Approximately 25 miles             
          of the pipeline consists of 16-inch pipe; the remainder consists            
          of 12-inch or smaller pipe.                                                 
               Petitioner's pipeline system is located on both private and            
          public property.  Because it is not always possible or                      

          1  If we decide petitioner must capitalize all or some of                   
          these expenses, then petitioner will be entitled to a                       
          corresponding depreciation allowance.                                       
          2  Unless otherwise indicated, all section references are to                
          the Internal Revenue Code in effect for the taxable year at                 
          issue, and all Rule references are to the Tax Court Rules of                
          Practice and Procedure.                                                     

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