Page:United States Statutes at Large Volume 110 Part 3.djvu/106

 110 STAT. 1836 PUBLIC LAW 104-188—AUG. 20, 1996 26 USC 512 note. (b) EFFECTIVE DATE. —The amendment made by this section shall apply to amounts included in gross income in any taxable year beginning after December 31, 1995. SEC. 1604. DEPRECIATION UNDER INCOME FORECAST METHOD. (a) GENERAL RULE.— Section 167 (relating to depreciation) is amended by redesignating subsection (g) as subsection (h) and by inserting after subsection (f) the following new subsection: " (g) DEPRECIATION UNDER INCOME FORECAST METHOD.— "(1) IN GENERAL. — If the depreciation deduction allowable under this section to any taxpayer with respect to any property is determined under the income forecast method or any similar method— "(A) the income from the property to be taken into account in determining the depreciation deduction under such method shall be equal to the amount of income earned in connection with the property before the close of the 10th taxable year following the taxable year in which the property was placed in service, "(B) the adjusted basis of the property shall only include amounts with respect to which the requirements of section 461(h) are satisfied, "(C) the depreciation deduction under such method for the 10th taxable year beginning after the taxable year in which the property was placed in service shall be equal to the adjusted basis of such property as of the beginning of such 10th taxable year, and "(D) such taxpayer shall pay (or be entitled to receive) interest computed under the look-back method of paragraph (2) for any recomputation year. "(2) LOOK-BACK METHOD.— The interest computed under the look-back method of this paragraph for any recomputation year shall be determined by— "(A) first determining the depreciation deductions under this section with respect to such property which would have been allowable for prior taxable years if the determination of the amounts so allowable had been made on the basis of the sum of the following (instead of the estimated income from such property)— "(i) the actual income earned in connection with such property for periods before the close of the recomputation year, and "(ii) an estimate of the future income to be earned in connection with such property for periods after the recomputation year and before the close of the 10th taxable year following the taxable year in which the property was placed in service, "(B) second, determining (solely for purposes of computing such interest) the overpayment or underpayment of tax for each such prior taxable year which would result solely from the application of subparagraph (A), and "(C) then using the adjusted overpayment rate (as defined in section 460(b)(7)), compounded daily, on the overpayment or underpayment determined under subparagraph (B). For purposes of the preceding sentence, any cost incurred after the property is placed in service (which is not treated as a

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