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2. Southern Interchange Contract
Petitioner seeks ITCs for property/equipment purchased
pursuant to the interchange contract with the Southern companies,
which petitioner contends is a TRA section 203(b)(1)(A) binding
contract. Petitioner argues that the interchange contract was
binding on December 31, 1985, and required FPL to purchase
certain property/equipment. This equipment was placed in service
during the 1988, 1989 and 1990 taxable years with tax bases of
$39,605,571, $2,648,789, and $1,169,866, respectively.
Respondent argues that the property/equipment purchased was not
the subject matter of the agreement and thus does not qualify for
an ITC. Respondent supports his contention by referring to the
following excerpt from the legislative history: “The general
binding contract rule applies only to contracts in which the
construction, reconstruction, erection, or acquisition of
property is itself the subject matter of the contract.” H. Conf.
Rept. 99-841 (Vol. II), supra at II-55, 1986-2 C.B. (Vol. 4) at
55. To resolve this issue, we must examine the interchange
contract and its amendments and the amended power agreement to
determine the subject matter of that contract.
The interchange contract, dated October 18, 1979,
established a mechanism to facilitate the contractual
relationship between the Southern companies and FPL. The
interchange contract provided for, inter alia, the creation of
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