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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
reduction.
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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