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petitioner to be a credible witness and accept his testimony with
respect to these items and their cost.3
Petitioners placed the bus in service in 1985. According to
petitioner, most of the expenditures for the listed conversion
items were made in 1985. The expenditures for the conversion
items in that year total $21,400; however, on their return
petitioners reported only $2,099 for improvements to the bus,
which they deducted pursuant to section 179.
During 1986 petitioners expended a total of $4,600 to
recondition the front bumper, install the furnace, repaint the
body, and finish the kitchen and the bathroom. On their return
for 1986, petitioners reported only $2,883 as the cost of
improvements made to the bus in that year.
For purposes of calculating depreciation, petitioners' bus
is 5-year property. See sec. 168(c)(2)(B), I.R.C. 1954 (as
amended);4 Rev. Proc. 83-35, 1983-1 C.B. 745, 746. It appears
3Petitioners' list included $780 for personal items that
were in the bus when it burned. We do not consider this amount
as it is not part of the basis of the bus. Petitioners' list
also included an acquisition cost for the bus that is slightly
higher than the amount stipulated. We reject the amount on
petitioners' list as it is contrary to the stipulated acquisition
cost.
4The bus was placed in service in 1985; thus, the method of
accounting for the depreciation of the bus is the accelerated
cost recovery system (ACRS) as provided by I.R.C. 1954 (as
amended). Under ACRS, the depreciation deduction is calculated
by multiplying the asset's unadjusted basis by the appropriate
(continued...)
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