100 STAT. 2136
PUBLIC LAW 99-514—OCT. 22, 1986 "(6) TREATMENTS OF ADDITIONS OR IMPROVEMENTS TO PROP-
ERTY.—In the case of any addition to (or improvement of) any property— "(A) any deduction under subsection (a) for such addition or improvement shall be computed in the same manner as the deduction for such property would be computed if such property had been placed in service at the same time as such addition or improvement, and "(B) the applicable recovery period for such addition or improvement shall begin on the later of— "(i) the date on which such addition (or improvement) is placed in service, or "(ii) the date on which the property with respect to which such addition (or improvement) was made is placed in service. "(7) TREATMENT OF CERTAIN TRANSFEREES.—
"(A) IN GENERAL.—In the case of any property transferred in a transaction described in subparagraph (B), the transferee shall be treated as the transferor for purposes of computing the depreciation deduction determined under this section with respect to so much of the basis in the hands of the transferee as does not exceed the adjusted basis in the hands of the transferor. "(B) TRANSACTIONS COVERED.—The transactions described
in this subparagraph are any transaction described in section 332, 351, 361, 371(a), 374(a), 721, or 731. Subparagraph (A) shall not apply in the case of a termination of a partnership under section 708(b)(1)(B). "(C) PROPERTY REACQUIRED BY THE TAXPAYER.—Under
regulations, property which is disposed of and then reacquired by the taxpayer shall be treated for purposes of computing the deduction allowable under subsection (a) as if such property had not been disposed of. "(D) EXCEPTION.—This paragraph shall not apply to any transaction to which subsection (fK5) applies (relating to churning transactions). "(8) TREATMENT OF LEASEHOLD IMPROVEMENTS.—In the case of any building erected (or improvements made) on leased property, if such building or improvement is property to which this section applies, the depreciation deduction shall be determined under the provisions of this section. "(9) NORMAUZATION RULES.—
"(A) IN GENERAL.—In order to use a normalization method of accounting with respect to any public utility property for purposes of subsection (fK2)— "(i) the taxpayer must, in computing its tax expense for purposes of establishing its cost of service for ratemaking purposes and reflecting operating results in its regulated books of account, use a method of depreciation with respect to such property that is the same as, and a depreciation period for such property that is no shorter than, the method and period used to compute its depreciation expense for such purposes; and "(ii) if the amount allowable as a deduction under this section with respect to such property differs from the amount that would be allowable as a deduction under section 167 (determined without regard to sec-
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