Page 186

TITLE 26-INTERNAL REVENUE CODE (B) subsections (a) and (b) shall be ap- plied by substituting "48" for "60" each place that it appears in such subsections. This section shall not apply to any qualified railroad rolling stock placed in service in 1969 and owned by any person who is not a domes- tic common carrier by railroad, or a corpora- tion at least 95 percent of the stock of which is owned by one or more such common carri- ers. (3) Placed In service in 1970 If any qualified railroad rolling stock is placed in service in 1970 by a domestic common carrier by rail or by a corporation at least 95 percent of the stock of which is owned by one or more such common carriers, then subsection (a) shall be applied, without regard to paragraph (2), as if such rolling stock were placed in service on December 31, 1969. (4) Railroad rolling stock not in short supply The Secretary shall determine (with the as- sistance of the Secretary of Transportation) which types of railroad rolling stock are not in short supply and shall prescribe regula- tions designating such types. The term "qualified railroad rolling stock" shall not in- clude any rolling stock which- (A) is of the type of rolling stock designat- ed by such regulations as not in short supply, and (B) is placed in service after (1) 1972, or (ii) 30 days after the date on which such regulations are promulgated, whichever is later. (5) Adjusted basis (A) The adjusted basis of any qualified railroad rolling stock, with respect to which an election has been made under this sec- tion, shall not be increased, for purposes of this section, for amounts chargeable to cap- ital account for additions or improvements after the amortization period has begun. (B) Costs incurred in connection with a used unit of railroad rolling stock which are properly chargeable to capital account shall be treated as a separate unit of railroad rolling stock for purposes of this section. (C) The depreciation deduction provided by section 167 shall, despite the provisions of subsection (a), be allowed with respect to the portion of the adjusted basis which is not taken into account in applying this sec- tion. (6) Construction termination If at any time during the amortization period any qualified railroad rolling stock ceases to meet the requirements of subsection (d)(1), the taxpayer shall be deemed to have terminated under subsection (c) his election under this section. Such termination shall be effective beginning with the month following the month in which such cessation occurs. (7) Method of accounting for date placed in service For purposes of subsections (a) and (b), in the case of qualified railroad rolling stock placed in service after December 31, 1969, and before January 1, 1976, the taxpayer may elect (unless paragraph (3) is applicable) to begin the 60-month period with the date when such rolling stock is treated as having been placed in service under a method of ac- counting for acquisitions and retirements of property which- (A) prescribes a date when property is placed In service, and (B) is consistently followed by the taxpay- er. (f) Life tenant and remainderman In the case of qualified railroad rolling stock leased to a domestic common carrier, and held by one person for life with remainder to an- other person, the deduction under this section shall be computed as if the life tenant were the absolute owner of the property and shall be al- lowable to the life tenant. (g) Cross reference For treatment of certain gain derived from the disposi. tion of property the adjusted basis of which Is deter. mined with regard to this section, see section 1245. (Added Pub. L. 91-172, title VII, § 705(a), Dec. 30, 1969, 83 Stat. 670, and amended Pub. L. 93- 625, § 3(b), Jan. 3, 1975, 88 Stat. 2109; Pub. L. 94-455, title XIX, § 1906(b)(13)(A). Oct. 4, 1976, 90 Stat. 1834.) AMENDMENTS 1976-Subsec. (b). Pub. L. 94-455 struck out "or his delegate" in two places following "Secretary". Subsec. (c). Pub. L. 94-455 struck out "or his dele- gate" following "Secretary". Subsec. (e)(4). Pub. L. 94-455 struck out "or his dele- gate" following "Secretary". 1975-Subsec. (e)(1). Pub. L. 93-625, § 3(b)(1), substi- tuted "1976" for "1975". Subsec. (e)(7). Pub. L. 93-625, § 3(b)(2), substituted "January 1, 1976" for "January 1, 1975". EFFECTIVE DATE ' Section 705(c) of Pub. L. 91-172 provided that: "The amendments made by this section [enacting this sec- tion and section 185 of this title] shall apply with re- spect to taxable years beginning after December 31, 1969." SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in sections 48, 57, 642, 1082, 1245 of this title. § 185. Amortization of railroad grading and tunnel bores (a) General rule In the case of a domestic common carrier by railroad, the taxpayer shall, at his election, be entitled to a deduction with respect to the am- ortization of the adjusted basis (for determin- ing gain) of his qualified railroad grading and tunnel bores. The amortization deduction pro- vided by this section with respect to such prop- erty shall be in lieu of any depreciation deduc- tion, or other amortization deduction, with re- spect to such property for any taxable year to which the election applies. (b) Amount of deduction (1) In general The deduction allowable under subsection (a) for any taxable year shall be an amount determined by amortizing ratably over a period of 50 years the adjusted basis (for de- termining gain) of the qualified railroad grad- ing and tunnel bores of the taxpayer. Such 50-year period shall commence with the first § 185 Page 186