Page 187

TITLE 26-INTERNAL REVENUE CODE taxable year for which an election under this section is effective. (2) Special rule In the case of qualified railroad grading and tunnel bores placed in service after the begin- ning of the first taxable year for which an election under this section is effective, the 50- year period with respect to such property shall begin with the year following the year the property is placed in service. (c) Election of amortization The election of the taxpayer to take the am- ortization deduction provided in subsection (a) may be made for any taxable year beginning after December 31, 1969. Such election shall be made by filing with the Secretary, in such manner, in such form, and within such time, as the Secretary may by regulations prescribe, a statement of such election. The election shall remain in effect for all taxable years subse- quent to the first year for which it is effective and shall apply to all qualified railroad grading and tunnel bores of the taxpayer, unless, on ap- plication by the taxpayer, the Secretary per- mits him, subject to such conditions as the Sec- retary deems necessary, to revoke such election. (d) Election with respect to pre-1969 property A taxpayer may, for any taxable year begin- ning after December 31, 1974, elect for purposes of this section to treat the term "qualified rail- road grading and tunnel bores" as including pre-1969 railroad grading and tunnel bores. An election under this subsection shall be made by filing with the Secretary, in such manner, in such form, and within such time, as the Secre- tary may by regulations prescribe, a statement of such election. The election under this sub- section shall remain in effect for all taxable years, after the first year for which it is effec- tive, for which an election under subsection (c) is effective. The election under this subsection shall apply to all pre-1969 railroad grading and tunnel bores of the taxpayer, unless, on appli- cation by the taxpayer, the Secretary permits him, subject to such conditions as the Secretary deems necessary, to revoke such election. (e) Adjusted basis for pre-1969 railroad grading and tunnel bores (1) In general The adjusted basis of any pre-1969 railroad grading and tunnel bore shall be determined under this subsection. (2) Property acquired or constructed after Febru- ary 28, 1913 (A) In the case of pre-1969 railroad grad- ing and tunnel bores- (1) acquired by the taxpayer after Feb- ruary 28, 1913, or (ii) the construction of which was com- pleted by the taxpayer after February 28, 1913. the adjusted basis of such property shall be equal to the adjusted basis (for determining gain) of such property in the hands of the taxpayer. (B) In the case of property described in subparagraph (A)(i)- (1) which was in existence on February 28, 1913, (ii) for which the taxpayer has a substi- tuted basis, and (iii) such substituted basis for which would, but for the provisions of this sec- tion, be determined under section 1053, then the adjusted basis of such property shall be determined as if such property were properly described in paragraph (3)(A). (3) Property acquired or constructed before March 1, 1913 (A) In the case of pre-1969 railroad grad- ing and tunnel bores- (i) acquired by the taxpayer before March 1, 1913, or (11) the construction of which was com- pleted by the taxpayer before March 1, 1913, the adjusted basis of such property shall be determined under the provisions of subpar- agraph (B), (C), or (D) of this paragraph. (B) In the case of any property valued under an original valuation made by the In- terstate Commerce Commission pursuant to section 19a of part I of the Interstate Com- merce Act (49 U.S.C. 19a), the adjusted basis of such property shall be equal to the amount ascertained by the Interstate Com- merce Commission as of the date of such valuation to be such property's cost of re- production new (as the term "cost of repro- duction new" is used in such section 19a). (C) In the case of property which was not valued by the Interstate Commerce Com- mission in the manner described in subpara- graph (B), but which was valued under an original valuation made by a comparable State regulatory body, the adjusted basis of such property shall be equal to the amount ascertained by such State regulatory body as of the date of its original valuation to be such property's value. (D) If, in the case of any property to which this paragraph applies- (i) neither subparagraph (B) nor (C) ap- plies, or (ii) notwithstanding subparagraphs (B) and (C), either the taxpayer or the Secre- tary can establish the adjusted basis (for purposes of determining gain) of such property in the hands of the taxpayer, then the adjusted basis of such property shall be equal to its adjusted basis (for pur- poses of determining gain) in the hands of the taxpayer. (f) Definitions For purposes of this section- (1) Railroad grading and tunnel bores The term "railroad grading and tunnel bores" means all improvements resulting from excavations (including tunneling), con- struction of embankments, clearings, diver- sions of roads and streams, sodding of slopes, and from similar work necessary to provide, construct, reconstruct, alter, protect, improve, replace, or restore a roadbed or right-of-way for railroad track. If expenditures for im- provements described in the preceding sen- tence are incurred with respect to an existing roadbed or right-of-way for railroad track, Page 187 § 185