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During the years in issue, Florida Power incurred
substantial costs related to its electric plants. The
expenditures for these costs were recorded as either capital
expenditures or repair expenses for regulatory accounting and
financial reporting purposes. In preparing its tax returns for
the years in issue, petitioner used the same characterization of
expenditures for tax reporting purposes that Florida Power did
for regulatory accounting and financial reporting purposes,
except for specific Schedule M-1, Reconciliation of Income (Loss)
Per Books With Income Per Return, adjustments.4 For the years in
issue, petitioner characterized approximately $2.1 billion in
expenditures related to Florida Power’s electric plants as repair
expenses for tax purposes.
During the years in issue, petitioner made Schedule M-1
adjustments on its original tax returns with respect to Florida
Power. The Schedules M-1 adjustments for the years 1988 to 1991
3(...continued)
might be increased. However, if P did elect to increase the size
of the retirement units under the authority of the FPSC, P would
be in violation of the FERC rules prohibiting increases in the
size of retirement units. Thus, the retirement units actually
used by Florida Power for regulatory accounting purposes
conformed with FERC rules.
4A Schedule M-1 is a schedule attached to a Form 1120, U.S.
Corporation Income Tax Return. It identifies the different
treatment of income and expense items for book and tax purposes.
See Southwestern Energy Co. v. Commissioner, 100 T.C. 500, 503
n.4 (1993); Orange & Rockland Utils. v. Commissioner, 86 T.C.
199, 205 (1986).
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