- 6 -
whether, as a matter of law, the income forecast method could be
used in connection with consumer durables leased under rent-to-
own contracts.
In El Charro I, respondent had determined that the income
forecast method could not be used with the particular assets in
question.3 In ABC Rentals of San Antonio, Inc. v. Commissioner,
supra, the Court saw the question to be addressed as: “whether
the consumer durables leased under rent-to-own contracts are
properties properly depreciable under the income forecast
method.” Focusing its attention on section 168(f)(1),4 the Court
held:
that petitioners have failed to demonstrate that the
consumer durables leased in their rent-to-own business
constitute property properly depreciated under the
income forecast method of depreciation. It is clear
that the consumer durables in this case are not
property similar in character to the assets which have
been allowed to use the income forecast method of
depreciation.
The Court’s underlying rationale for its holding included the
following:
3 In this case, the parties presented three issues,
including the issue decided in El Charro I. The other two issues
involved whether El Charro made a valid election to use the
income forecast method under sec. 168(f)(1) and whether use of
the income forecast method clearly reflects its income. The
question decided in El Charro I, however, preempts and obviates
any need to consider the “other two issues.”
4 Section references are to the Internal Revenue Code in
effect for the period under consideration.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011