Disposition by transfer to a supplies account
(vi) Disposition by transfer to a supplies account. If a taxpayer made an election under 1.162-3(d) to treat the cost of any rotable spare part, temporary spare part, or standby emergency spare part (as defined in 1.162-3(c)) as a capital expenditure subject to the allowance for depreciation and also made an election under paragraph (l) of this section to include that rotable, temporary, or standby emergency spare part in a general asset account, the taxpayer can dispose of the rotable, temporary, or standby emergency spare part by transferring it to a supplies account only if the taxpayer has obtained the consent of the Commissioner to revoke the 1.162-3(d) election. If a taxpayer made an election under 1.162-3T(d) to treat the cost of any material and supply (as defined in 1.162-3T(c)(1)) as a capital expenditure subject to the allowance for depreciation and also made an election under paragraph (l) of this section to include that material and supply in a general asset account, the taxpayer can dispose of the material and supply by transferring it to a supplies account only if the taxpayer has obtained the consent of the Commissioner to revoke the 1.162-3T(d) election. See 1.162-3(d)(3) for the procedures for revoking a 1.162-3(d) or a 1.162-3T(d) election. (vii) Leasehold improvements. The rules of paragraph (e) of this section also apply to (A) A lessor of leased property that made an improvement to that property for the lessee of the property, has a depreciable basis in the improvement, made an election under paragraph (l) of this section to include the improvement in a general asset account, and disposes of the improvement, or disposes of a portion of the improvement as described in paragraph (e)(1)(ii) of this section, before or upon the termination of the lease with the lessee. See section 168(i)(8)(B); and (B) A lessee of leased property that made an improvement to that property, has a depreciable basis in the improvement, made an election under paragraph (l) of this section to include the improvement in a general asset account, and disposes of the improvement, or disposes of a portion of the improvement as described in paragraph (e)(1)(ii) of this section, before or upon the termination of the lease. (viii) Determination of asset disposed of(A) General rules. For purposes of applying paragraph (e) of this section to the disposition of an asset in a general asset account, instead of the disposition of the general asset account, the facts and circumstances of each disposition are considered in determining what is the appropriate asset disposed of. The asset for disposition purposes may not consist of items placed in service by the taxpayer on different dates, without taking into account the applicable convention. For purposes of determining what is the appropriate asset disposed of, the unit of property determination under 1.263(a)-3(e) or in published guidance in the Internal Revenue Bulletin under section 263(a) (see 601.601(d)(2) of this chapter) and the distinct asset determination under 1.1031(a)-3(a)(4) do not apply. (B) Special rules. In addition to the general rules in paragraph (e)(2)(viii)(A) of this section, the following rules apply for purposes of applying paragraph (e) of this section to the disposition of an asset in a general asset account instead of the disposition of the general asset account: