HAR § 18-235-110.7-08 — Placed in service

(a) In general. Property shall be considered to be placed in service in the earliest of the following taxable years: (1) The taxable year in which the period for depreciation with respect to the property begins; (2) The taxable year in which under ACRS, a claim for recovery allowances with respect to the property begins; or (3) The taxable year in which the property is placed in a condition or state of readiness and available for a specifically assigned function by the taxpayer. The following examples illustrate paragraph (3): (A) Parts that are acquired and set aside during the taxable year for use as a replacement for a particular machine in order to avoid operational time loss shall be considered to be in a condition or state of readiness and available for a specifically assigned function by the taxpayer. (B) If operational farm equipment is acquired during the taxable year and it is not practicable to use the equipment for its specifically assigned function in the taxpayer’s business of farming until the following year, the equipment shall be considered to be in a condition or state of readiness and available for a specifically assigned function by the taxpayer in the latter year. (C) Equipment that is acquired for a specifically assigned function and is operational but is undergoing testing to eliminate defects shall be considered to be in a condition or state of readiness and available for a specifically assigned function by the taxpayer. (D) Fruit-bearing trees and vines shall not be considered to be in a condition or state of readiness and available for a specifically assigned function until they have reached an income-producing state. (E) Materials and parts acquired to be used in the construction, reconstruction or erection of an item of equipment shall not be considered to be in a condition or state of readiness and available for a specifically assigned function until the equipment itself is functional. (b) Sale-leaseback. In a sale-leaseback transaction (as defined in section 18-235-110.7-01), the property shall be considered to be placed in service on the date the property was first placed in service by the seller-lessee.