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question.33 Petitioners further contend that respondent's
method of calculating the allowable amortization deduction
contravenes the "annual accounting concept" as defined in Burnet
v. Sanford & Brooks Co., 282 U.S. 359 (1931). Petitioners
maintain that respondent's method would, in effect, gradually
recapture the excessive depreciation from closed years by
offsetting it against future depreciation deductions over the
remaining lives of the affected contracts, thereby disregarding
the statute of limitations. Petitioners cite Newark Morning
Ledger v. United States, 507 U.S. 546 (1993), for the proposition
that the primary purpose of an annual amortization deduction is
"to further the integrity of periodic income statements by making
a meaningful allocation of the cost entailed in the use
33 Sec. 1.167(a)-1(b) and (c), Income Tax Regs., provides, in
relevant part, as follows:
(b) The estimated remaining useful life may be subject to
modification by reason of conditions known to exist at
the end of the taxable year and shall be redetermined
when necessary regardless of the method of computing
depreciation. However, estimated remaining useful life
shall be redetermined only when the change in the
useful life is significant and there is a clear and
convincing basis for the redetermination. * * *
(c) Salvage value shall not be changed at any time
after the determination made at the time of acquisition
merely because of changes in price levels. However, if
there is a redetermination of useful life under the
rules of * * * [sec. 1.167(a)-1(b)], salvage value may
be redetermined based upon facts known at the time of
such redetermination of useful life. * * *
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