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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
income and is to be retired from service by the
taxpayer. * * *
In Carland, Inc. v. Commissioner, 90 T.C. 505, 547 (1988), affd.
in part, revd. in part and remanded 909 F.2d 1101 (8th Cir.
1990), we stated: "An important factor in the determination of
salvage value is the taxpayer's experience and the particular
circumstances of that experience. Industry experience is also a
factor which may be given consideration." In this case,
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