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units to third parties by category, such percentage being equal
to the ratio such total sales proceeds bore to the total initial
purchase price of all rental units in that category, was as
follows:
Category Percentage
Guaranteed ABC
Appliances 2.0 2.7
Televisions Less than 1 5.5
Furniture 2.3 2.4
Stereos Less than 1 Less than 1
Video Cassette Recorders Less than 1 Less than 1
The total initial cost of rental units acquired during the
years 1987 and 1988 and which remained in Guaranteed's rental
inventory as of the end of the years was $142,173.71 and
$117,812.45, respectively. The total initial cost of rental
units acquired during the tax periods ending May 31, 1987,
December 31, 1987, and December 31, 1988, and which remained in
ABC's rental inventory as of the end of the periods was
$273,435.20, $137,102.89, and $328,557.04, respectively.
OPINION
The U.S. Court of Appeals for the Tenth Circuit has directed
us to determine: (1) Whether petitioners made a proper election
under section 168(f) and, (2) if a proper election was made under
section 168(f), whether petitioners improperly applied the income
forecast method because they did not accurately forecast the
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