Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 69-2

1969-1 C.B. 25

Sec. 48

IRS Headnote

Submarine cable and submarine cable repeaters that are functionally used at terminals of the communication systems extending from California to Hawaii qualify for the investment credit.

Full Text

Rev. Rul. 69-2

The taxpayer, a public utility, is engaged in furnishing telephone and certain other communication services throughout the islands of the State of Hawaii. The taxpayer owns an interest in a submarine cable system that extends from Hawaii to California, and uses such system in connection with its business of furnishing the telephone and other communications services in Hawaii. The facilities comprising the system qualify as "section 38 property" within the meaning of section 48(a)(1) of the Internal Revenue Code of 1954 and are physically located in Hawaii and California except for the part of the submarine cable and submarine cable repeaters that lie on the ocean floor in international waters outside the boundaries of Hawaii and California. The submarine cable and the submarine cable repeaters are functionally used at the terminals of the system that are located in California and Hawaii.

Held, the submarine cable and submarine cable repeaters, since they are used solely within the United States, qualify for the investment credit allowed under section 38 of the Code. Thus, the provisions of section 48(a)(2) of the Code, which concern property used outside the United States, do not apply in the instant case.