ABC Rentals of San Antonio, Inc., et al - Page 27

                                       - 27 -                                         

          from the rent-to-own equipment for the taxable year, and the                
          denominator of which is the forecasted or estimated total income            
          to be derived from the rent-to-own equipment during its useful              
          life.  Rev. Rul. 60-358, 1960-2 C.B. 68.  This fraction 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.  Id.                                
               A.   Income Forecast                                                   
               Respondent contends that in applying the income forecast               
          method of depreciation, petitioners failed to forecast accurately           
          the income to be received from the assets being depreciated.  In            
          fact, respondent contends that the income to be received from               
          equipment placed in service was never forecast.  Rather, 300                
          percent of the asset's cost was always used as the denominator of           
          the fraction.  While the latter may be true, the parties                    
          stipulated that petitioners estimated that the total gross rental           
          anticipated to be received on each rental unit would be 300                 
          percent of its initial cost, which was consistent with the                  
          practice in the rent-to-own industry.                                       
               Each Entity's 1991 and 1992 experience data indicates that,            
          per category of rental units, the actual average total amount of            
          gross rental the Entities received under all rental contracts for           
          a rental unit in such category was the product of the initial               







Page:  Previous  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  30  31  32  33  34  Next

Last modified: May 25, 2011