Page:United States Statutes at Large Volume 95.djvu/234

 95 STAT. 208

PUBLIC LAW 97-34—AUG. 13, 1981 tion (a) as of the beginning of the taxable year in which such disposition occurs. (C) DISPOSITION INCLUDES RETIREMENT.—For purposes of

this subparagraph, retirement. "(e)

the

term

'disposition

includes

PROPERTY EXCLUDED FROM APPLICATION OF SECTION.—For

purposes of this section— "(1) PROPERTY PLACED I N SERVICE BEFORE JANUARY i, i 9 8 i. —

The term 'recovery property' does not include property placed in service by the taxpayer before January 1, 1981. "(2) CERTAIN METHODS OF DEPRECIATION.—The term 'recovery property' does not include property if— "(A) the taxpayer elects to exclude such property from the application of this section, and (B) for the first taxable year for which a deduction would (but for this election) be allowable under this section with respect to such property in the hands of the taxpayer, the property is properly depreciated under the unit-of-production method or any method of depreciation not expressed in a term of years (other than the retirement-replacementbetterment method). "(3) SPECIAL RULE FOR CERTAIN PUBLIC UTILITY PROPERTY.—

26 USC 167.

"(A) IN GENERAL.—The term 'recovery property' does not include public utility property (within the meaning of section 167(1)(3)(A)) if the taxpayer does not use a normalization method of accounting. "(B) USE OF NORMALIZATION METHOD DEFINED.—For purposes of subparagraph (A), in order to use a normalization method of accounting with respect to any public utility property— ' (i) the taxpayer must, in computing its tax expense for purposes of establishing its cost of service for ratemaking purposes and reflecting operating results in its regulated books of account, use a method of depreciation with respect to such property that is the same as, and a depreciation period for such property that is no shorter than, the method and period used to compute its depreciation expense for such purposes; and "(ii) if the amount allowable as a deduction under this section with respect to such property differs from the amount that would be allowable as a deduction under section 167 (determined without regard to section 167(1)) using the method (including the period, first and last year convention, and salvage value) used to compute regulated tax expense under subparagraph (B)(i), the taxpayer must make adjustments to a reserve to reflect the deferral of taxes resulting from such difference. "(C) PUBLIC UTILITY PROPERTY W H I C H IS N O T RECOVERY

PROPERTY.—In the case of public utility property which, by reason of this paragraph, is not treated as recovery property, the allowance for depreciation under section 167(a) shall be an amount computed using the method and period referred to in subparagraph (B)(i). "(4) CERTAIN TRANSACTIONS IN PROPERTY PLACED IN SERVICE BEFORE 1986.— "(A) SECTION 1245 CLASS PROPERTY.—The term 'recovery

property' does not include section 1245 class property acquired by the taxpayer after December 31, 1980, if—

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