- 52 -
over those assets’ useful lives. Id. at 11-14. The Supreme
Court also stated:
An additional pertinent factor is that capitalization
of construction-related depreciation by the taxpayer
who does its own construction work maintains tax parity
with the taxpayer who has its construction work done by
an independent contractor. The depreciation on the
contractor’s equipment incurred during the performance
of the job will be an element of cost charged by the
contractor for his construction services, and the
entire cost, of course, must be capitalized by the
taxpayer having the construction work performed. The
Court of Appeals’ holding [that the taxpayer could
currently deduct the depreciation expense] would lead
to disparate treatment among taxpayers because it would
allow the firm with sufficient resources to construct
its own facilities and to obtain a current deduction,
whereas another firm without such resources would be
required to capitalize its entire cost including
deprecation charged to it by the contractor.
Id. at 14. To clarify, the Supreme Court was concerned that the
tax treatment of construction-related depreciation should be the
same between: (1) A taxpayer who constructs its own capital
asset; and (2) a taxpayer who hires a contractor to construct a
capital asset, and thus bears the burden of that depreciation
through the price charged by the contractor for his construction
services.
Respondent attempts to extend the tax parity rationale of
Idaho Power Co. v. Commissioner, supra, beyond what the Supreme
Court intended. Using the MCI Denver-El Paso conduit
installation project as an example, respondent states:
Qwest * * * had available for its own use or future
sale to other customers three buried conduits compared
to MCI’s one identical conduit on the Denver to El Paso
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