ABC Rentals of San Antonio, Inc., et al - Page 2

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                SUPPLEMENTAL MEMORANDUM FINDINGS OF FACT AND OPINION                  
               HAMBLEN, Judge:  This case is before us on remand from the             
          Court of Appeals for the Tenth Circuit.  ABC Rentals of San                 
          Antonio, Inc. v. Commissioner, 142 F.3d 1200 (10th Cir. 1998),              
          revg. and remanding T.C. Memo. 1994-601.                                    
               The issues for decision concern the proper election and                
          proper application of the income forecast method of depreciation.           
          We previously determined in ABC Rentals of San Antonio, Inc. v.             
          Commissioner, T.C. Memo. 1994-601 (ABC Rentals I), that                     
          petitioners failed to demonstrate that the consumer durables,               
          leased in their rent-to-own business, constitute property which             
          is properly depreciable under the income forecast method of                 
          depreciation.  The Court of Appeals concluded that section                  
          168(f)(1)2 does not preclude use of the income forecast method              
          for property like petitioners' rent-to-own inventory.  Since we             
          determined that petitioners' rental units could not be                      
          depreciated using the income forecast method and did not reach              
          respondent's other arguments, the Court of Appeals has directed             
          us to determine on remand                                                   
               whether taxpayers made a proper election under                         
               section 168(f) and, if so, whether they improperly                     
               applied the income forecast method because they did not                
               accurately forecast the income expected over the life                  


               2All section references are to the Internal Revenue Code in            
          effect for the years at issue, and all Rule references are to the           
          Tax Court Rules of Practice and Procedure.                                  




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