Sunoco, Inc. and Subsidiaries - Page 19

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             (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).  The portion of the               
             overburden removal costs that was capitalized was also                   
             taken into account in computing a Schedule M adjustment on               
             Cordero’s separate returns for book expenses that were not               
             deductible.  This Schedule M adjustment was necessary                    
             because, as mentioned above, the overburden removal                      
             expenses were treated as production costs for book purposes              
             and, as such, were treated as an offset to sales without                 
                  The parties have stipulated that, for tax purposes,                 
             “Cordero incorrectly classified its costs of overburden                  
             removal at its Gillette mine as a mine development                       
             expense.”  They agree that the subject overburden removal                
             costs should not have been treated as development                        
             expenditures during any of the years in issue, and that                  
             the treatment of the subject costs on Cordero’s separate                 
             returns included with petitioner’s consolidated returns is               
             wrong.  The parties have also stipulated that “the removal               
             of overburden in the continuous mining operation benefited               
             only that limited increment of the coal seam exposed after               
             removal of the overburden.”  Accordingly, they agree that                

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