Clajon Gas Co., L.P., Aquila Gas Pipeline Corp., Tax Matters Partner - Page 18

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          production”.  Id. at 1258.  This focus fails to take into                   
          account, and is contrary to, an important aspect of the                     
          regulations authorizing the issuance of Rev. Proc. 87-56, 1987-2            
          C.B. 674, and its predecessor revenue procedures.  The                      
          regulations require not only that property be classified by the             
          type of activity in which the property is used but also that the            
          taxpayer depreciating property on the basis of a particular class           
          life must itself be engaged in (be the actor in) the activity               
          described in the asset guideline class.  Moreover, the Court of             
          Appeals’ focus fails to take into account the segmented approach            
          to the natural gas industry taken in Rev. Proc. 87-56, supra.               
                    b.  The Regulations                                               
               Section 1.167(a)-11(b)(4)(iii)(b), Income Tax Regs., states            
          that “property shall be included in the asset guideline class for           
          the activity in which the property is primarily used” and that              
          “[p]roperty shall be classified according to primary use even               
          though the activity in which such property is primarily used is             
          insubstantial in relation to all the taxpayer’s activities.”                
          (Emphasis added.)  Because the regulation considers the                     
          substantiality of the primary use activity in relation to all of            
          the taxpayer’s activities, we interpret the regulation as                   
          comparing a part to the whole (i.e., one of the taxpayer’s                  
          activities is compared to all of the taxpayer’s activities) so              

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