[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.168A-3]

[Page 1108-1109]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.168A-3  Election to discontinue amortization.

    (a) If a taxpayer has elected to take amortization deductions with 
respect to an emergency facility, it may, after such election and prior 
to the expiration of the 60-month amortization period, discontinue the 
amortization deductions for the remainder of the 60-month period. An 
election to discontinue the amortization deductions shall be made by a 
notice in writing filed with the district director for the internal 
revenue district in which the return of the taxpayer is required to be 
filed, specifying the month as of the beginning of which the taxpayer 
elects to discontinue such deductions. Such notice shall be filed before 
the beginning of the month specified therein, and shall contain a 
description clearly identifying the emergency facility with respect to 
which the taxpayer elects to discontinue the amortization deductions. If 
the taxpayer so elects to discontinue the amortization deductions, it 
shall not be entitled to any further amortization deductions with 
respect to such facility.
    (b) A taxpayer which thus elects to discontinue amortization 
deductions with respect to an emergency facility is entitled, if such 
facility is depreciable property under section 167 and the regulations 
thereunder, to a deduction for depreciation with respect to such 
facility. The deduction for depreciation shall begin with the first 
month as to which the amortization deduction is not applicable, and 
shall be computed on the adjusted basis of the property as of the 
beginning of such month (see section 1011 and the regulations 
thereunder).
    (c) This section may be illustrated by the following example:

    Example. On July 1, 1954, the X Corporation, which makes its income 
tax returns on the calendar year basis, purchases an emergency facility, 
consisting of land with a building thereon, at a cost of $306,000 of 
which $60,000 is allocable to the land and

[[Page 1109]]

$246,000 to the building. The certificate covers the entire acquisition. 
The corporation elects to take amortization deductions with respect to 
the facility and to begin the 60-month amortization period with the 
taxable year 1955. Depreciation of the building in the amount of $6,000 
is deducted and allowed for the taxable year 1954. On March 25, 1956, 
the corporation files notice with the district director of its election 
to discontinue the amortization deductions beginning with the month of 
April 1956. The adjusted basis of the facility on January 31, 1955, is 
$300,000, or the cost of the facility ($306,000) less the depreciation 
allowed for 1954 ($6,000). The amortization deductions for the taxable 
year 1955 and the months of January, February, and March 1956, amount to 
$75,000, or $5,000 per month for 15 months. Since, at the beginning of 
the amortization period (January 1, 1955), the adjusted basis of the 
land ($60,000) is one-fifth of the adjusted basis of the entire facility 
($300,000) and since there are no adjustments to basis other than on 
account of amortization during the period, the adjusted basis of the 
land should be reduced by $15,000, or one-fifth of the entire 
amortization deduction, and the adjusted basis of the building should be 
reduced by $60,000, or four-fifths of the entire amortization deduction. 
Accordingly, the adjusted basis of the facility as of April 1, 1956, is 
$225,000, of which $180,000 is allocable to the building for the purpose 
of depreciation deductions under section 167, and $45,000 is allocable 
to the land.

[T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 21, 1960. 
Redesignated by T.D. 8116, 51 FR 46619, Dec. 24, 1986]