Broader use of the income forecast method.

Author:Willens, Robert
Position:Brief Article

Perhaps the most important depreciation methods case decided over the past several years was ABC Rentals of San Antonio v. Commissioner. In this case, the court ruled the income forecast method could be used to depreciate tangible property. Prior to the case, the income forecast method was used primarily by motion picture companies--it allowed for a depreciation of property over a period that was determined by a film's income. However, it no longer is limited to the assets of a motion picture company.

The Tax Court, citing Internal Revenue Code section 168(f)(1), said the taxpayer could choose not to use the modified accelerated cost recovery system (MACRS) as long as the property was properly depreciated under a method not based on the property's life. Because ABC Rentals accurately documented its projected income as derived from its rental property, it could be depreciated under the income...

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