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Section 48(b) defines "new section 38 property" as section
38 property "acquired after December 31, 1961, if the original
use of such property commences with the taxpayer". Section 38
property acquired by purchase that is not new section 38 property
is considered "used section 38 property." Sec. 48(c). The
original use of property is "the first use to which the property
is put, whether or not such use corresponds to the use of such
property by the taxpayer." Sec. 1.48-2(b)(7), Income Tax Regs;
see Baicker v. Commissioner, 93 T.C. 316, 322 (1989). The amount
of the investment tax credit may depend on whether the section 38
property is new or used within the meaning of section 48. Sec.
48(c)(2).3 Property generally is "placed in service" in the year
in which such property is "placed in a condition or state of
readiness and availability for a specifically assigned function".
Sec. 1.46-3(d), Income Tax Regs.
In this case, the evidence indicates that the partnership
came into existence for Federal tax purposes as of December 28,
1978, the date on which the limited partners made capital
contributions to the partnership. Up until that time, the
partnership was without capital and could not conduct business.
Although the partnership agreement was entered into on December
3 For tax year 1978, sec. 48(c)(2)(A) provides: "The cost of
used section 38 property taken into account under section
46(c)(1)(B) for any taxable year shall not exceed $100,000."
This limitation applies at the partnership level and at the
partner level. Sec. 48(c)(2)(D).
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