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various DRI projects for which it claims ITCs. Because of the
large number of DRI projects and in the interest of brevity, we
will detail in appendix B the information from the work orders
that petitioner cites on brief to support its claimed ITCs.
With respect to equipment related to the DRI projects,
petitioner incurred capitalized costs (tax basis) of $1,464,901,
$3,609,855, and $4,832,205 for equipment placed in service in the
1988, 1989, and 1990 taxable years, respectively.
OPINION
A. The Statutory Landscape
Before 1986, section 38(a)95 of the Internal Revenue Code of
1954 provided businesses with an investment tax credit (ITC), and
section 46(a) determined the amount of the ITC available to
taxpayers. Section 49(a) eliminated the ITC for all property
placed in service after December 31, 1985.96 However, section 49
95 Unless otherwise indicated, all section references are to
the Internal Revenue Code for the years at issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
96 Sec. 49(a), which was added to the Internal Revenue Code
by the Tax Reform Act of 1986 (TRA), Pub. L. 99-514, sec. 211,
100 Stat. 2166, provides:
SEC. 49. TERMINATION OF REGULAR PERCENTAGE.
(a) General Rule.–-For purposes of determining the
amount of the investment tax credit determined under
section 46, the regular percentage shall not apply to
any property placed in service after December 31, 1985.
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