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include any costs related to the preparation of a path for the
relocation or the construction of a new concrete ringwall
foundation. The relocation itself took approximately 4 hours.
In 1994, CITGO relocated a 30,000-barrel tank from Austin,
Texas, to the Vicksburg terminal, a distance of approximately 550
miles. The tank was 40 feet high with a diameter of 73 feet and
became known as tank No. 2. Baker Tank Co. performed the
relocation using the dismantling and reconstruction method.
CITGO relocated the tank in anticipation of closing its Austin
terminal due to local opposition to its operation after an
environmental problem arose at another oil company’s terminal.
Three other tanks were sold for scrap.
According to CITGO’s contract with Baker Tank Co. for the
relocation of Vicksburg tank No. 2, the cost of the relocation
was $234,856. The price included the installation of a second
tank bottom, an internal floating roof, and accessories.
F. The Tank Improvements at Issue
In 1996 and 1997, CITGO spent $13,075,824 and $803,489,
respectively, on the construction of new tanks and additions or
improvements to existing tanks. CITGO capitalized the
expenditures for its books and records. Petitioner depreciated
the expenditures using the MACRS recovery rates prescribed in
Rev. Proc. 87-56, 1987-2 C.B. 674, 686, for Asset Guideline Class
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