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to "transition property." In relevant part, section 49(e)(1)
defines "transition property" as:
any property placed in service after December 31, 1985,
and to which the amendments made by section 201 of the
Tax Reform Act of 1986 do not apply, except that in
making such determination--
* * * * * *
(B) [section] * * * 204(a)(3) of such Act shall be
applied by substituting "December 31, 1985" for
"March 1, 1986,"[6]
Section 204(a)(3) of the Act provides the supply or service
transition rule, upon which petitioner relies. As modified by
section 49(e)(1)(B), section 204(a)(3) of the Act (section
204(a)(3)) provides that "section 201 shall not apply to any
property which is readily identifiable with and necessary to
carry out a written supply or service contract, or agreement to
lease, which was binding on * * * [December 31, 1985]."
Under section 203(b)(2)(A) of the Act, section 204(a)
transition property with a useful life of 20 years or more may be
placed in service before January 1, 1991, and still qualify for
the section 204(a) transition rules. Section 203(b)(2)(C)(ii) of
the Act provides that "property described in section 204(a) shall
6 Sec. 201 of the Tax Reform Act of 1986, Pub. L. 99-514, 100
Stat. 2121, modified the accelerated cost recovery system and
sec. 203 of the Act provided that such modifications were
generally effective for assets placed in service after Dec. 31,
1986. Secs. 203 and 204 of the Act provided a number of
transition rules postponing the effective date of the sec. 201
changes.
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