Clajon Gas Co., L.P., Aquila Gas Pipeline Corp., Tax Matters Partner - Page 38

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          producers connected to the TGS needed a gathering system to                 
          further the production process by removing impurities and                   
          delivering their gas to processing facilities.  Indeed, all of              
          the producers connected to the TGS had contractual agreements to,           
          and did in fact, “use” Clajon’s gathering systems.  Even in                 
          contracts where title passed to Clajon, the gathering system                
          remained the means by which the producers’ gas ultimately                   
          traveled to the gas processing plant and transmission lines.                
          Contrary to the majority’s holding, the primary use of the TGS              
          was the same regardless of who owned the systems or the gas                 
          flowing through the systems.                                                
               The majority base their holding on the theory that the                 
          availability of all asset classes depends on the primary use of             
          the taxpayer rather than the primary use of the asset.  This is,            
          essentially, an ownership requirement.  Such a theory is                    
          inconsistent with the law.  Section 1.167(a)-11(b)(4)(iii)(b),              
          Income Tax Regs., states that “Property 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.”  This regulation unequivocally states           
          that, regardless of the taxpayer’s activities, the primary use of           
          the asset determines the appropriate asset class for purposes of            

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