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for property in the first taxable year that it is placed in
service.
Section 1.46-3(d)(4)(ii), Income Tax Regs., provides the
following exception:
if, for the first taxable year in which property is
placed in service by the taxpayer, the property
qualifies as section 38 property but the basis of the
property does not reflect its full cost for the reason
that the total amount to be paid or incurred by the
taxpayer for the property is indeterminate, a credit
shall be allowed to the taxpayer for such first taxable
year with respect to so much of the cost as is
reflected in the basis of the property as of the close
of such year, and an additional credit shall be allowed
to the taxpayer for any subsequent taxable year with
respect to the additional cost paid or incurred during
such year and reflected in the basis of the property as
of the close of such year.
Section 1.46-3(d)(4)(ii), Income Tax Regs., provides the taxpayer
with an ITC in subsequent years when the cost of the property
actually placed in service is indeterminate in the year it is
placed in service. However, this regulation does not allow a
credit for additional components or property placed in service in
subsequent years. We agree with respondent that this regulation
has limited applicability. Section 1.46-3(d)(4)(ii), Income Tax
Regs., applies only to property that the taxpayer actually placed
in service in the first taxable year, where the “basis” of the
components of the property that was actually placed in service
does not reflect the full cost of the property because “the total
amount to be paid or incurred by the taxpayer for the property is
indeterminate”.
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