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component parts constitute a single piece of property when the
components are interdependent, essential, and integral to the
operation of a unit at the time it is placed in service. Id.;
Haw. Indep. Refinery, Inc. v. United States, supra at 1069;
Consumers Power Co. v. Commissioner, supra at 725-726. For
purposes of the ITC, the components that make up a unit on the
date that the property is operational and placed in service
constitute a single unit of property, even though additional
components may be necessary in the future for the unit to
continue to function properly. These additional components would
constitute separate property. See Armstrong World Indus., Inc.
v. Commissioner, supra at 434, 436.
Petitioner argues that components that are added to property
in years subsequent to the year the property is placed in service
can be considered part of the same property for purposes of the
ITC. Petitioner argues that section 1.46-3(d)(4), Income Tax
Regs., allows property to qualify for an ITC in “‘portions’ from
one year to the next, as construction continues and the remainder
of the functionally integrated components * * * are completed and
placed in service.”
Section 1.46-3(d)(4)(i), Income Tax Regs., allows an ITC
under section 38 “only for the first taxable year in which such
property is placed in service by the taxpayer.” Section 1.46-
3(d)(4)(i), Income Tax Regs., provides:
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