SECTION 5. NETWORK ASSET

MAINTENANCE ALLOWANCE METHOD FOR WIRELESS NETWORK ASSETS

.01 In general . Under the network asset maintenance allowance method, the taxpayer must determine the amount of its wireless network asset expenditures that are not required to be capitalized under

section 5.02 of this revenue procedure (network asset maintenance allowance) and the amount of wireless network asset expenditures that are treated as § 263(a) capital expenditures under section 5.03 of this revenue procedure (§ 263(a) capital expenditures). A taxpayer that uses the network asset maintenance allowance method described in this section 5 must use that method for all of its wireless network asset expenditures (which includes expenditures relating to wireless network assets acquired in an applicable asset acquisition as defined in § 1060 or in a transaction to which § 338(h)(10) applies, even though the cost of such property is removed from the total cost of capital additions for the taxable year as provided in § 5.02(2)(b)-(c) below).

.02 Network asset maintenance al- lowance . The amount of the network asset maintenance allowance for a particular taxable year is determined as follows:

(1) Start with the total cost of capital additions for financial statement purposes that are placed in service (within the meaning of § 1.46–3(d)(1)(ii)) during the taxable year.

(2) Decrease the amount determined in (1) by the following amounts:

(a) the cost of property other than wireless network assets;

(b) the cost of any wireless network assets acquired in an applicable asset acquisition as defined in § 1060; and

(c) the cost of any wireless network assets acquired in a transaction to which § 338(h)(10) applies.

(3) Adjust the amount determined after applying steps (1) and (2) to determine the adjusted basis of the property under § 1011, including any adjustments described in § 1016 except for the following:

(a) Any basis adjustments attributable to changes made after December 31, 2007 to the taxpayer’s unit of property definitions used for repair versus capitalization determinations.

(b) Any adjustments described in § 1016(a)(2) and § 1016(a)(3) and any adjustments that require tax basis to be reduced before depreciation is computed ( e.g., § 179, § 179D, or similar provisions; § 44 and § 46; and the payments for specified energy property under § 1603 of the American Recovery and Reinvestment Tax Act of 2009, Division B, Pub.

2011–18 I.R.B. 744 May 2, 2011

(5) In addition, expenditures for wireless network assets acquired in an applicable asset acquisition as defined in § 1060 or in a transaction to which § 338(h)(10) applies are capital expenditures under § 263(a) to which the ordinarily applicable basis and holding period rules and regulations apply.

.04 Required schedule . A taxpayer utilizing the network asset maintenance allowance method must attach a schedule to its federal income tax return for the taxable year identifying the amounts for each step of the network asset maintenance allowance method computation provided in sections 5.02(1)-(5) above.

.05 Exampl e. X is a wireless telecommunications carrier with wireless network assets used primarily to provide wireless telecommunication or broadband services by mobile phones. X adopts the wireless network asset maintenance allowance method provided in this revenue procedure. To determine the wireless network asset maintenance allowance for the taxable year, X first determines its adjusted basis attributable to wireless network assets as follows:

Total cost of capital additions placed in service for the taxable year per financial statements $1,000,000,000

Less : Cost of property other than wireless network assets ( e.g. land, intangibles, etc.) ($100,000,000)

Less : Cost of assets acquired in a § 1060 or § 338(h)(10) transaction ($11,000,000)

Less/Plus : Other basis adjustments (excluding adjustments per IRC §§ 1016(a)(2) & (a)(3) and sections ($3,000,000) 5.02(3)(a) & 5.03(4) of this rev. proc.)

Adjusted basis attributable to network assets that are 5-year, 7-year, and 15-year property and nonresidential real property

$886,000,000

Multiply by : Maintenance allowance percentage (5%) X 5%

Network asset maintenance allowance amount $44,300,000

sification under § 168(e) or Rev. Proc. 87–56, 1987–2 C.B. 674), for the same or similar type of assets used in wireless telecommunications or other industries.