Clajon Gas Co., L.P., Aquila Gas Pipeline Corp., Tax Matters Partner - Page 19

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          that it is the taxpayer’s primary use of the property that is               
          relevant.  It is, thus, the taxpayer’s primary use of the                   
          property, and not some other person’s use, that determines                  
          classification.8  The taxpayer in question, of course, is the               
          person electing to use asset guideline classes for purposes of              
          computing its depreciation deductions for property placed in                
          service during the year.9  That it is only the electing                     
          taxpayer’s use that counts is verified by the special rule in the           
          regulations that applies to leased property.  After stating the             
          general rule that “property shall be included in the asset                  
          guideline class for the activity in which the property is                   

               8  Generally, as in this case, the taxpayer is the owner of            
          the property.  See, however, sec. 1.167(a)-4, Income Tax Regs.,             
          which provides for lessee depreciation of permanent leasehold               
          improvements to a lessor-owner’s premises; see also Depot                   
          Investors, Ltd. v. Commissioner, T.C. Memo. 1992-145 (allowing              
          lessee cost recovery of a leasehold improvement over the                    
          remaining lease term).                                                      
               9  Sec. 1.167(a)-11(b)(1), Income Tax Regs., provides:  “The           
          allowance for depreciation of eligible property * * * to which              
          the taxpayer elects to apply this section shall * * * constitute            
          the reasonable allowance for depreciation of such property under            
          section 167(a).”  (Emphasis added.)                                         
               Although Clajon is a partnership and, thus, not itself                 
          subject to the income tax, see sec. 701 (partners not partnership           
          subject to income tax), the depreciation deduction is taken in              
          computing Clajon’s taxable income, see sec. 703(a), and the                 
          regulations provide that, if a partnership places eligible                  
          property in service, the partnership is to make the election to             
          apply sec. 1.167(a)-11, Income Tax Regs., sec. 1.167(a)-                    
          11(e)(3)(ii), Income Tax Regs.                                              

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