Rev. Rul. 74-237

The Internal Revenue Service has reconsidered Rev. Rul. 72-507, 1972-2 C.B. 198, regarding the terminology used for the nuclear fuel assemblies used in generating electricity.

Rev. Rul. 72-507 held that the costs of nuclear fuel elements are capital expenditures subject to the allowance for depreciation under section 167 of the Code. The useful lives and salvage values for the fuel elements are questions of fact.

Rev. Rul. 72-507 states, in part, that "* * * nuclear fuel elements are placed in assemblies in a nuclear core. Once the assemblies are placed in the nuclear core of the nuclear power reactor it is necessary to replace approximately 1/3 to 1/5 of the fuel elements in the core each year because of waste fission products that have accumulated in the core as by-products of the nuclear fission process. This accumulation has the effect of dampening the chain reaction. When this occurs, some of the fuel elements are removed and the remaining fuel elements, along with replacement fuel elements, are rearranged to permit them to continue to efficiently support a nuclear chain reaction."

The nuclear fuel elements considered in Rev. Rul. 72-507, are in fact nuclear fuel assemblies usually fabricated by the following method. A number of enriched uranium pellets are inserted into a tube to create a fuel rod. A number of fuel rods, fixed in position by spacers, are enclosed in a metal channel that is capped on both ends. The channel spacers and caps provide for the location of the fuel rods, control the water flow distribution in combination with the orifices in the caps, support the fuel rods during fuel handling operations, and assist the positioning of the control rods.

The expenditures for nuclear fuel assemblies (i.e., the composite of fabricated nuclear fuel and container) are capital expenditures subject to an allowance for depreciation under section 167 of the Code.

Rev. Rul. 72-507 is clarified concerning the terminology used for nuclear fuel assemblies subject to the allowance for depreciation.

¹ Also released as Technical Information Release 1289, dated April 29, 1974.