26 U.S.C. § 263: Capital expenditures

expenditures for the development of mines or deposits deductible under section 616, research and experimental expenditures deductible under section 174 or 174A, soil and water conservation expenditures deductible under section 175, expenditures by farmers for fertilizer, etc., deductible under section 180, expenditures for removal of architectural and transportation barriers to the handicapped and elderly which the taxpayer elects to deduct under section 190, expenditures for tertiary injectants with respect to which a deduction is allowed under section 193, expenditures for which a deduction is allowed under section 179, expenditures for which a deduction is allowed under section 179B, expenditures for which a deduction is allowed under section 179C, expenditures for which a deduction is allowed under section 179D, or expenditures for which a deduction is allowed under section 179E. Any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made. Notwithstanding subsection (a), and except as provided in subsection (i), regulations shall be prescribed by the Secretary under this subtitle corresponding to the regulations which granted the option to deduct as expenses intangible drilling and development costs in the case of oil and gas wells and which were recognized and approved by the Congress in House Concurrent Resolution 50, Seventy-ninth Congress. Such regulations shall also grant the option to deduct as expenses intangible drilling and development costs in the case of wells drilled for any geothermal deposit (as defined in section 613(e)(2)) to the same extent and in the same manner as such expenses are deductible in the case of oil and gas wells. This subsection shall not apply with respect to any costs to which any deduction is allowed under section 59(e) or 291. In the case of expenditures in connection with the rehabilitation of a unit of railroad rolling stock (except a locomotive) used by a domestic common carrier by railroad which would, but for this subsection, be properly chargeable to capital account, such expenditures, if during any 12-month period they do not exceed an amount equal to 20 percent of the basis of such unit in the hands of the taxpayer, shall, at the election of the taxpayer, be treated (notwithstanding subsection (a)) as deductible repairs under section 162 or 212. An election under this subsection shall be made for any taxable year at such time and in such manner as the Secretary prescribes by regulations. An election may not be made under this subsection for any taxable year to which an election under subsection (e) applies to railroad rolling stock (other than locomotives). In the case of a domestic common carrier by rail (including a railroad switching or terminal company) which uses the retirement-replacement method of accounting for depreciation of its railroad track, expenditures for acquiring and installing replacement ties of any material (and fastenings related to such ties) shall be accorded the same tax accounting treatment as expenditures for replacement ties of wood (and fastenings related to such ties). No deduction shall be allowed for interest and carrying charges properly allocable to personal property which is part of a straddle (as defined in section 1092(c)). Any amount not allowed as a deduction by reason of the preceding sentence shall be chargeable to the capital account with respect to the personal property to which such amount relates. interest on indebtedness incurred or continued to purchase or carry the personal property, and all other amounts (including charges to insure, store, or transport the personal property) paid or incurred to carry the personal property, over the amount of interest (including original issue discount) includible in gross income for the taxable year with respect to the property described in subparagraph (A), any amount treated as ordinary income under section 1271(a)(3)(A), 1276, or 1281(a) with respect to such property for the taxable year, the excess of any dividends includible in gross income with respect to such property for the taxable year over the amount of any deduction allowable with respect to such dividends under section 243 or 245, and any amount which is a payment with respect to a security loan (within the meaning of section 512(a)(5)) includible in gross income with respect to such property for the taxable year. This subsection shall not apply in the case of any hedging transaction (as defined in section 1256(e)). In the case of any short sale, this subsection shall be applied after subsection (h). In the case of any obligation to which section 1277 or 1282 applies, this subsection shall be applied after section 1277 or 1282. a taxpayer makes any payment with respect to any stock used by such taxpayer in a short sale and such payment is in lieu of a dividend payment on such stock, and the closing of such short sale occurs on or before the 45th day after the date of such short sale, If the payment described in paragraph (1)(A) is in respect of an extraordinary dividend, paragraph (1)(B) shall be applied by substituting “the day 1 year after the date of such short sale” for “the 45th day after the date of such short sale”. For purposes of this subsection, the term “extraordinary dividend” has the meaning given to such term by section 1059(c); except that such section shall be applied by treating the amount realized by the taxpayer in the short sale as his adjusted basis in the stock. the taxpayer holds, has an option to buy, or is under a contractual obligation to buy, substantially identical stock or securities, or under regulations prescribed by the Secretary, a taxpayer has diminished his risk of loss by holding 1 or more other positions with respect to substantially similar or related property. is treated as ordinary income by the taxpayer, and is received by the taxpayer as compensation for the use of any collateral with respect to any stock used in such short sale. Subparagraph (A) shall not apply if one or more payments or distributions is in respect of an extraordinary dividend. In the case of any short sale, this subsection shall be applied before subsection (g). subsection (c) shall not apply, and at the election of the taxpayer, be included in adjusted basis for purposes of computing the amount of any deduction allowable under section 611 (determined without regard to section 613), or if subparagraph (A) does not apply, be allowed as a deduction ratably over the 10-taxable year period beginning with the taxable year in which such costs were paid or incurred. The amendments made by this section [amending this section and sections 243, 291, 381, 616, and 617 of this title] shall apply to costs paid or incurred after December 31, 1986 , in taxable years ending after such date. The amendments made by this section shall not apply with respect to intangible drilling and development costs incurred by United States companies pursuant to a minority interest in a license for Netherlands or United Kingdom North Sea development if such interest was acquired on or before December 31, 1985 .” The amendments made by this section [amending this section and sections 57, 465, 751, and 1254 of this title] shall apply with respect to wells commenced on or after October 1, 1978 , in taxable years ending on or after such date. The taxpayer may elect to capitalize or deduct any costs to which section 263(c) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] applies by reason of the amendments made by this section [amending this section and sections 57, 465, 751, and 1254 of this title]. Any such election shall be made before the expiration of the time for filing claim for credit or refund of any overpayment of tax imposed by chapter 1 of such Code [section 1 et seq. of this title] with respect to the taxpayer’s first taxable year to which the amendments made by this section apply and for which he pays or incurs costs to which such section 263(c) applies by reason of the amendments made by this section. Any election under this paragraph may be changed or revoked at any time before the expiration of the time referred to in the preceding sentence, but after the expiration of such time such election may not be changed or revoked.” The amendment made by subsection (b) [amending this section] shall apply to taxable years ending after December 31, 1970 . The amendments made by subsection (c) [amending this section] shall apply to taxable years beginning after December 31, 1969 .”