- 14 -
On the partnership’s and on petitioners’ Federal income tax
returns for the years in issue, the costs of some of the videos
purchased for rental to customers were expensed currently. In
the partnership's and on petitioners' income tax returns,
depreciation expense deductions relating to the balance of the
videos rented to customers were claimed using the Modified
Accelerated Cost Recovery System, a 3-year life, and the half-
year convention.
On audit, respondent disallowed the current expenses claimed
for the cost of videos rented to customers. Respondent also
determined that the proper method for computing depreciation on
the videos was the straight-line method using a 2-year life and a
$5 per-tape-salvage value (straight-line method). For some
years, respondent’s adjustments to depreciation resulted in a
decrease in the depreciation claimed, and in other years,
respondent's adjustments to depreciation resulted in an increase
in the depreciation to be allowed.
The schedule below sets forth respondent’s recomputation of
the partnership’s and of petitioners' allowable depreciation
relating to videos rented to customers:
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011