Page:United States Statutes at Large Volume 100 Part 3.djvu/543

 PUBLIC LAW 99-514—OCT. 22, 1986

100 STAT. 2351

"(2) ALLOCABLE COSTS.—The costs described in this paragraph with respect to any property are— "(A) the direct costs of such property, and "(B) such property's proper s h a r e of those indirect costs (including taxes) part or all of which a r e allocable to such property. "(b) PROPERTY TO W H I C H SECTION A P P U E S. — E x c e p t a s other w i s e

provided in this section, this section shall apply to— "(1) PROPERTY PRODUCED BY TAXPAYER.—Real or t a n g i b l e per-

sonal property produced by the taxpayer. "(2) PROPERTY ACQUIRED FOR RESALE.—

"(A) IN GENERAL.—Real or personal property described in section 1221(1) which is acquired by the tax p a y e r for resale. "(B) EXCEPTION FOR TAXPAYER WITH GROSS RECEIPTS O F

$10,000,000 OR LESS.—Subparagraph (A) shall not apply to any personal property acquired during any taxable year by the tax p a y e r for resale if the average annual gross receipts of the tax p a y e r (or any predecessor) for the 3-taxable year period ending with the tax a b l e year preceding such taxable year do not exceed $10,000,000. "(C) AGGREGATION RULES, ETC.—For purposes of s u b p a r a -

g r a p h (B), r u l e s similar to the rules of paragraph s (2) and (3) of section 448(c) shall apply. For purposes of paragraph (1), the term 'tangible personal property' shall include a film, sound recording, video tape, book, or similar property. "(c) GENERAL EXCEPTIONS. — "(1) PERSONAL USE PROPERTY.—This section s h a l l not a p p l y to

any property produced by the tax p a y e r for u s e by the tax p a y e r other than in a trade or business or a n activity conducted for profit. "(2) RESEARCH A N D EXPERIMENTAL EXPENDITURES.—This sec-

tion shall not apply to any a m o u n t allowable a s a deduction under section 174. "(3) CERTAIN DEVELOPMENT AND OTHER COSTS O F OIL AND GAS

WELLS OR OTHER MINERAL PROPERTY.—This section shall not apply to any cost allowable a s a deduction under section 263(c), 616(a), or 617(a). "(4) COORDINATION WITH LONG-TERM CONTRACT RULES.—This

section shall not apply to any property produced by the taxp a y e r pursuant to a long-term contract. "(5) T I M B E R A N D CERTAIN ORNAMENTAL TREES.—This section

shall not apply to— "(A) trees raised, harvested, or grown by the tax p a y e r other than t r e e s described in clause (ii) of subsection (e)(4)(B) (after application of the last sentence thereof), and "(B) any real property underlying such trees. "(d) EXCEPTION FOR F A R M I N G BUSINESSES.— "(1) SECTION TO APPLY ONLY I F PREPRODUCTIVE PERIOD IS MORE T H A N 2 YEARS.—

"(A) IN GENERAL.—This section shall not apply to any p l a n t or a n i m a l which is produced by the tax p a y e r in a farming business and which has a preproductive period of 2 year s or less. "(B) EXCEPTION FOR TAXPAYERS REQUIRED TO USE ACCRUAL

METHOD.—Subparagraph (A) shall not apply to any corpora-

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