- 83 -
supra at 1008. The Government had based one of its arguments for
affirmance on the assumption that the old (Rev. Proc. 62-21)
priority rule remained in effect (i.e., that any asset described
both in class 50.0 and class 65.0 would be deemed to be only in
class 65.0, for which a longer useful life coincidentally had been
specified). Walgreen had not challenged that assumption, and,
immediately after reviewing the evolution of the asset
classification system, the Seventh Circuit stated that it would
accept the assumption for purposes of deciding the appeal. (The
Seventh Circuit remanded to the Tax Court to find whether any or all
of the leasehold improvements in question were excluded from class
50.0 by virtue of being described in class 65.0; we found that some
were and some were not.)
Petitioner makes the simplistic argument that, since the
Seventh Circuit stated that class 50.0 (now class 57.0) included all
assets used in wholesale or retail trade except those in class 65.0,
and the furniture and fixtures would not be in class 65.0, they must
be in class 57.0. We do not draw that conclusion. The priority
rule of Rev. Proc. 62-21 provided not only that the asset category
of buildings prevailed over the activity category of wholesale and
retail trade but also that the asset category that included office
furniture and fixtures likewise prevailed. The consideration that
the Seventh Circuit gave to the evolution of the asset
classification system before accepting the assumption of the
Government as to the survival of the Rev. Proc. 62-21 priority rule
with respect to class 65.0 leads us to conclude that the Seventh
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