- 27 -
experience data was derived. Moreover, the parties stipulated
that, due to such continuity, the parties believe that if
petitioners' actual data were available for the calendar years
1987 and 1988, the data, if delineated, would not vary materially
from the experience data delineated for 1991 and 1992.
Consequently, in this particular case, since the parties
stipulated as to the estimate of income expected over the life of
the rental property and this stipulation approximated
petitioners' experience, and since they stipulated that 1991-92
data did not vary materially from the years in question, we hold
that in this situation petitioners did accurately forecast the
income expected over the life of the rental property.
B. Salvage Value
Second, the Court of Appeals has directed us to determine
whether petitioners improperly applied the income forecast method
because they did not make an adjustment for salvage value. ABC
Rentals of San Antonio, Inc. v. Commissioner, 142 F.3d at 1211.
Under the income forecast method, the fraction--reflecting the
ratio of current income to lifetime income--is multiplied by the
cost of the rent-to-own equipment which produced income during
the taxable year, after appropriate adjustment for estimated
salvage value. Rev. Rul. 60-358, supra.
Section 1.167(a)-1(c)(1), Income Tax Regs., provides:
Salvage value is the amount (determined at the
time of acquisition) which is estimated will be
realizable upon sale or other disposition of an
asset when it is no longer useful in the taxpayer's
trade or business or in the production of his
Page: Previous 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 NextLast modified: May 25, 2011