PDV America, Inc. and Subsidiaries - Page 16

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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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