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says "VAR". In addition, Statement 2 did not provide the
unadjusted basis of the rental property--the "Cost or Basis"
column is blank.
Furthermore, section 1.168-5(e)(3), Proposed Income Tax
Regs., supra, states that Form 4562, Depreciation and
Amortization, is provided for making the election. The 1987
instructions for this form provide the following guidance for
line 9 of section C, Other Depreciation:
Line 9.--Report property that you elect, under
section 168(f)(1), to depreciate by the units-of-
production method or any other method not based
on a term of years (other than the retirement-
replacement-betterment method).
On a separate sheet, attach: (1) a description
of the property and what depreciation method you
elect that excludes the property from ACRS; and
(2) the depreciable basis (cost or other basis,
reduced, if applicable, by salvage value, investment
credit, and the section 179 expense).
Enter the depreciation deduction in column (f).
The Form 4562 filed with Guaranteed's tax return for its
taxable year ending December 31, 1987, contains the heading on
line 9 "Property subject to section 168(f)(1) election."
However, Guaranteed left column (f) of line 9 blank. Rather, it
appears the depreciation deduction for the rental property has
been included in column (f) of line 10--"Other depreciation"
where a $40,616 deduction is claimed. Thus, Guaranteed failed to
indicate on its tax return, or on the accompanying Statement 2
and Form 4562, that the rental property (or any other of its
property) was subject to the section 168(f)(1) election.
Moreover, Guaranteed failed to indicate on its tax return, Form
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