HAR § 18-235-110.7-09 — Purchased and placed in service

(a) In general. The discussion in this section only applies to claims for and recapture of credit for property acquired during calendar year 1988, and for fiscal year taxpayer acquisitions occurring during the period beginning January 1, 1988, to December 31, 1988. From January 1, 1988, to December 31, 1988, all references in sections 18-235-110.7-01 to 18-235-110.7-22 to the phrase, “placed in service”, shall be substituted by the phrase, “purchased and placed in service”. As a result, for property acquired HRS §235-110.7 HRS §235-110.7 HRS §235-110.7 §18-235-110.7-09 during the period from January 1, 1988, to December 31, 1988, the date corresponding to the substituted phrase, “purchased and placed in service”, shall determine both the availability and recapture of any credit. (b) “Purchased and placed in service”, defined. Purchased and placed in service means the date the property is acquired, available or ready for use, whichever is earlier. Property purchased and placed in service does not include property which is acquired in a related-party transaction. (c) “Related-party transaction”, defined. A related-party transaction is a transaction in which: (1) The acquired property is owned or used at any time during 1987 and 1988 by the taxpayer or related person; or (2) The property is acquired in a transaction in which the user of the property does not change. (d) “Related person”, defined. A related person is: (1) A person whose relationship to a person who is acquiring its property would result in the disallowance of losses under I.R.C. §267 or 707(b) (but, in applying I.R.C. §267(b) and 267(c) for purposes of this paragraph, paragraph (4) of I.R.C. §267(c) shall be treated as providing that the family of an individual shall include only the individual’s spouse, ancestors, and lineal descendants); or (2) One component member of a controlled group who acquires property from another component member of the same controlled group. The term component member of a controlled group is defined by I.R.C. §1563(a), except that the phrase “more than 50 percent” shall be substituted for the phrase “at least 80 percent” each place it appears in I.R.C. §1563(a)(1). (e) Examples. Subsection (b) is illustrated as follows: Example 1. In 1988, a taxpayer pays the entire purchase price for eligible property which is to be delivered in 1989. The taxpayer takes possession of the property in 1989. The property shall be considered to have been purchased and placed in service in 1988. Example 2. In 1988, a taxpayer pays one-half of the entire purchase price for eligible property which is to be delivered in 1989. The taxpayer pays the remaining purchase price and takes possession of the property in 1989. The property shall be considered to have been purchased and placed in service in 1988. Example 3. In 1988, a taxpayer takes possession of and uses eligible property for which the taxpayer makes no payment in 1988, but for which the taxpayer will make full payment in 1989. The taxpayer does in fact pay the entire purchase price for the property in 1989. The property shall be considered to have been purchased and placed in service in 1988. Example 4. In 1988, a taxpayer enters into an installment sales contract to purchase eligible property and takes possession of the property. The property shall be considered to have been purchased and placed in service in 1988. Example 5. In 1988, a taxpayer enters into an installment sales contract to purchase eligible property. The taxpayer takes possession of the property in 1989. The property shall be considered to have been purchased and placed in service in 1988. Example 6. In 1987, a taxpayer pays the entire purchase price for eligible property which is to be delivered in 1988. The taxpayer takes possession of the property in 1988. The property shall be considered to have been purchased and placed in service in 1987 and thereby is not eligible for the credit. Example 7. In 1987, a taxpayer takes possession of and uses eligible property for which the taxpayer makes no payment in 1987, but for which the taxpayer will make full payment in 1988. The taxpayer does in fact pay the entire purchase price for the property in 1988. The property shall be considered to have been purchased and placed in service in 1987 and thereby is not eligible for the credit. (f) Examples. Subsections (b), (c), and (d) are illustrated as follows: Example 1. Taxpayer A is in the business of selling tractors. In 1987, A purchases tractors and holds them as inventory. In 1988, A sells tractors to Taxpayers B and C, both of whom use the tractors in their businesses which are located in Hawaii. B is in the business of landscaping and