Sunoco, Inc. and Subsidiaries - Page 11

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             over 5 years beginning with the year the costs were paid                 
             or incurred, as permitted by section 291(b)(2)(B)(i),                    
             and through 1985 it included that amount in “qualified                   
             investment” (within the meaning of section 46(c)) for                    
             purposes of computing investment credit, as permitted by                 
             section 291(b)(2)(B)(ii).  Cordero also took the total                   
             amount capitalized for each year into account in computing               
             the adjustment set forth on Schedule M-1, Reconciliation                 
             of Income Per Books with Income Per Return, for “expenses                
             recorded on books this year not deducted on this return”.                
                  As noted above, Cordero mistakenly capitalized 20                   
             percent of the mine development expenses reported for 1984,              
             rather than 15 percent, the statutory rate then in effect                
             under section 291(b)(1).  The parties agree that petitioner              
             is entitled to increase the aggregate deduction claimed in               
             1984 by the excess amount capitalized, $1,076,080, as long               
             as petitioner also makes appropriate correlative                         
             adjustments to petitioner’s reported investment tax credit               
             for 1984 and to its reported amortization for 1984 through               
                  For each of the taxable years 1987 through 1990,                    
             Cordero treated all of its overburden removal costs at the               
             Gillette mine as mine development costs, subject to section              
             291(b).  For each of those years, Cordero capitalized 30                 

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