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Amendment No. 2 provided for the “potential acceleration of the
effective date of the increase in the sale of long term power”.109
On February 18, 1982, the Southern companies and FPL entered
into an amended and restated power sales agreement (amended power
agreement). In the amended power agreement, FPL agreed to
acquire additional power from the Southern companies, and the
Southern companies agreed to sell more power to FPL. FPL agreed
to use its best efforts to construct internal transmission lines
to allow FPL to increase purchases of unit power capacity during
the contract period.110
In Katerelos v. Commissioner, T.C. Memo. 1996-340, the Court
addressed whether equipment purchased and used by a taxpayer to
operate a restaurant qualified for a credit under the binding
contract transitional rule. During 1985, the taxpayers executed
a lease for the premises where they operated a restaurant. The
taxpayers argued that they were required to purchase property for
use at the premises in order to operate the leased property;
therefore, the binding contract rule applied to the
109 The copy of amendment No. 2 in the record contains a
signature page, which is signed only by FPL.
110 Specifically, the amended power agreement provided that
FPL would construct: (i) A 500-kV transmission line from its
Duval substation to its Rice substation continuing to its
Poinsett substation; (ii) a separate 500-kV transmission line
from its Duval substation to its Poinsett substation; and (iii) a
500-kV transmission line from its Poinsett substation to its
Martin plant. FPL completed each of these transmission lines by
Jan. 1, 1985.
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