SECTION 5. TRANSMISSION AND

DISTRIBUTION PROPERTY SAFE HARBOR METHOD OF ACCOUNTING

.01 In general . A taxpayer using the transmission and distribution property safe harbor method provided by this revenue procedure must determine its units of transmission and distribution property as provided in section 5.02 of this revenue procedure. For each replacement of a portion of a unit of linear property, the taxpayer must determine whether more than 10 percent of the unit of linear property is replaced. If more than 10 percent of the unit of linear property is replaced, the cost of the replacement must be capitalized. If 10 percent or less of the unit of property is replaced, the cost of the replacement is not required to be capitalized under § 263(a). In general, individual replacements within a circuit are not aggregated in determining the percentage of a unit of linear property replaced. But see section 5.04 of this revenue procedure for situations where aggregation is required. The safe harbor method described in this section 5 provides the exclusive means for taxpayers using the transmission and distribution property safe harbor method to determine whether an expenditure for linear property is deductible or must be capitalized.

.02 Units of property . (1) Units of linear property . For purposes of this revenue procedure, the “unit of linear property” is determined on a circuit-by-circuit basis; each circuit contains the following eight units of linear property:

(a) All conductor and any associated devices, whether overhead or underground, used to conduct electricity (not including customer service lines and substation

or is capitalizable is a method of accounting under § 446. Section 446(e) and § 1.446–1(c) require taxpayers to secure the consent of the Commissioner before changing a method of accounting for federal income tax purposes. Section 1.446–1(e)(3)(ii) authorizes the Commissioner to prescribe administrative procedures setting forth the limitations, terms, and conditions necessary to permit a taxpayer to obtain consent to change a method of accounting.