Common use of In March 1985, K Corp Clause in Contracts

In March 1985, K Corp. com- pletes reconditioning of a machine, which it constructed and placed in service in 1982 and which has an adjusted basis in 1985 of $10,000. The cost of reconditioning amounts to an ad- ditional $20,000. K would be entitled to a basis of $20,000 in computing its qualified in- vestment in new section 38 property for 1985. In May 1985, K enters into a sale and lease- back transaction with L Corp. with respect to the reconditioned parts of the machine that are new section 38 property to K. K and L elect to have section 168(f)(8) apply. As- suming that the adjusted basis of the leased property is the same to L as it is to K, the property qualifies as qualified leased prop- erty under section 168(f)(8)(D)(ii) and L is considered the tax owner of the property. Since, for purposes other than determining § 5c.168(f)(8)–6 whether property is qualified leased prop- erty, the property is deemed originally placed in service not earlier than the date the property is used under the lease, the property is new section 38 property to L and L may claim the investment tax credit (and ACRS deductions) with respect to the leased property.

In March 1985, K Corp. com- pletes reconditioning of a machine, which it constructed and placed in service in 1982 and which has an adjusted basis in 1985 of $10,000. The cost of reconditioning amounts to an ad- ditional $20,000. K would be entitled to a basis of $20,000 in computing its qualified in- vestment in new section 38 property for 1985. In May 1985, K enters into a sale and lease- back transaction with L Corp. with respect to the reconditioned parts of the machine that are new section 38 property to K. K and L elect to have section 168(f)(8) apply. As- suming that the adjusted basis of the leased property is the same to L as it is to K, the property qualifies as qualified leased prop- erty under section 168(f)(8)(D)(ii) and L is considered the tax owner of the property. Since, for purposes other than determining § 5c.168(f)(8)–6 whether property is qualified leased prop- erty, the property is deemed originally placed in service not earlier than the date the property is used under the lease, the property is new section 38 property to L and L may claim the investment tax credit (and ACRS deductions) with respect to the leased property.