Source: https://law.justia.com/cases/federal/appellate-courts/F3/94/1545/602007/
Timestamp: 2019-09-23 09:02:58
Document Index: 541647007

Matched Legal Cases: ['§ 48', '§ 49', '§ 49', '§ 46', '§ 49', '§ 49', '§ 49', '§ 48', '§ 49', '§ 49', '§ 49']

B.f. Goodrich Company, Plaintiff-appellant, v. the United States, Defendant-appellee, 94 F.3d 1545 (Fed. Cir. 1987) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Federal Circuit › 1987 › B.f. Goodrich Company, Plaintiff-appellant, v. the United States, Defendant-appellee
B.f. Goodrich Company, Plaintiff-appellant, v. the United States, Defendant-appellee, 94 F.3d 1545 (Fed. Cir. 1987)
U.S. Court of Appeals for the Federal Circuit - 94 F.3d 1545 (Fed. Cir. 1987)
This scheme of investment tax credits and depreciation deductions persisted until 1982, when Congress passed the Tax Equity and Fiscal Responsibility Act (TEFRA), Pub. L. No. 97-248, 96 Stat. 324 (1982). TEFRA added to the Code a new provision, 26 U.S.C. § 48(q), which provided for an adjustment to the property's "basis," the value of the property used in determining depreciation deductions. As enacted, that provision recited:
While the 1986 amendments generally repealed the tax credit, 26 U.S.C. § 49(a), an exception remained for "transition property"--property, such as that involved in this case, purchased prior to 1986 but placed into service in 1986 or later. Id. at § 49(b) (1). After the amendments, the amount of the investment tax credit for transition property thus depended on when the property owner placed the property into service. Although transition property placed into service in 1986 provided the full 10 percent, id. at § 46, transition property placed into service in 1987 provided a credit of 8.25 percent, id. at §§ 49(c) (3), (5) (A)3 and transition property placed into service in 1988 or later provided a tax credit of only 6.5 percent. Id. at § 49(c) (1). Similarly, the amendments effected a 35 percent reduction in the amount of unexpired investment tax credits that could be carried forward to 1988 or later. Id. at § 49(c) (2). The 1986 amendments also affected depreciation deductions. The amendment to § 48(q) changed the amount of the basis reduction from 50 percent to 100 percent of the investment tax credit. See id. at § 49(d) (1) (A).
(B) the applicable percentage of the cost of each used section 38 property (as defined in section 48(c) (1)) placed in service by the taxpayer during such taxable year.
Because the property was placed in service after December 31, 1985, [taxpayer] must reduce its depreciable basis in the property to $900,000 under the 100-percent-of-credit basis reduction rule in section 49(d) (1) of the Code. The basis must be reduced in the year the property is placed in service, in 1986. However, because it is carried forward to 1988, the $100,000 credit is subject to the 35-percent credit reduction under section 49(c) (2). Thus, the credit eventually taken by [taxpayer] in 1988 is $65,000 ($100,000 reduced by 35 percent), even though [taxpayer] reduced its basis in the property by $100,000 in 1986. [Taxpayer] is not allowed to increase its basis in the property to reflect the reduction in the investment credit carryforward under section 49(c) (2).
(d) SPECIAL RULE FOR INVESTMENT TAX CREDIT.--In the case of the investment credit determined under section 46(a) (other than a credit to which section 48(q) (3) applies), subsection (a) shall be applied by substituting "an amount equal to 50 percent of" for "an amount equal to".
(2) Unexpired carryforwards to 1st taxable year beginning after June 30, 1987.--Any portion of the business credit carryforward under section 38(a) (1) attributable to the regular investment credit which has not expired as of the close of the taxable year preceding the 1st taxable year of the taxpayer beginning after June 30, 1987, shall be reduced by 35 percent.
(B) any portion of the business credit carryforward under section 38(a) (1) to such year,
Tax Reform Act of 1986, Pub. L. No. 99-514, 100 Stat. 2085 (1986)
Section 49(c) (3) recites a "special rule" for a fiscal tax year beginning before and ending after June 30, 1987, wherein the tax credit is reduced by the "applicable percentage," which is defined in § 49(c) (5) (A). According to § 49(c) (5) (A), the amount of the reduction varies gradually based on the start of the taxpayer's tax year, up to a maximum reduction of 35 percent. For calendar year taxpayers such as Goodrich, the amount of the reduction was only 17.5 percent--from 10 percent to 8.25 percent
We recognize, however, that IRS Revenue Rulings have no binding effect on this court. Trainer v. United States, 800 F.2d 1086, 1090 n. 7 (Fed. Cir. 1986); Farmar v. United States, 689 F.2d 1017, 1024 n. 12 (Ct. Cl. 1982)