- 33 -
under these circumstances, did not have to make an adjustment to
the rental units' costs for salvage value.
III. Conclusion
We hold that Guaranteed failed to make a proper election of
the income forecast method for its taxable year ending December
31, 1987, and that ABC failed to make a proper election for its
taxable year ending May 31, 1987. We hold further that ABC made
a proper election for its short taxable period ending December
31, 1987, since it substantially complied with the election
requirements for this short taxable period. For rental units
placed in service during taxable years ending in 1988, the
parties have stipulated that both Guaranteed and ABC properly
elected out of MACRS under section 168(f)(1).
Furthermore, in this particular case, since the parties
stipulated as to the estimate of income expected over the life of
the rental property, and this estimate was borne out by
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. In
addition, since the salvage value is inconsequential and since
the parties stipulated that 1991 and 1992 data did not vary
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