- 29 -
through the pipeline translates into a use of more than 10
percent of the bond proceeds. However, on brief, he seeks to
explain his position. He contends that petitioner’s governmental
use and Company’s purported private use of the pipeline occur
simultaneously. Accordingly, he claims that the entire pipeline
is treated as used in a private trade or business under section
1.141-3(g)(4)(iii), Income Tax Regs. We disagree.
First, even if we were to assume that Company uses the
pipeline, we cannot agree that petitioner’s governmental use and
Company’s private use would be simultaneous. Petitioner uses the
pipeline to dispose of the wastewater it generates as a byproduct
of its sewage system. Its use commences at its existing sewage
facilities and ends at the point-of-delivery connection.
Company, on the other hand, has agreed to assist petitioner in
disposing of a set amount of the wastewater. In exchange,
Company will have rights to use that amount of wastewater at the
point-of-delivery connection. Only then will Company commence
its use of the wastewater. We cannot agree that these
circumstances establish a simultaneous use. Any use by Company
of the pipeline is incidental and does not occur at the same time
as petitioner’s disposal use.21
21If we were to characterize the pipeline in a different
manner than the way respondent characterized that facility in the
context of the output facility regulations, we might characterize
the financed pipeline as performing a dual function. It disposes
(continued...)
Page: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: May 25, 2011