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Respondent's Recomputation of Depreciation
1989 1990 1991
Partnership
Depreciation claimed on return $55,452 $145,057 $118,404
Videos expensed on return 44,264 -- --
Recomputed depreciation (86,765) (181,015) (159,833)
Total decrease/(increase) 12,951 (35,958) (41,429)
petitioner's one-half share 6,475 (17,979) (20,715)
Petitioners
Depreciation claimed on return 56,074 95,293
Videos expensed on return 73,991
Recomputed depreciation (55,715) (121,075)
Total decrease $ 359 $ 48,209
A reasonable depreciation deduction is allowed for the
exhaustion and wear and tear of property used in a trade or
business. See sec. 167(a). Under sections 167(c) and 168(f),
movie videos are to be depreciated for Federal income tax
purposes using a straight-line method. See Rev. Rul. 89-62,
1989-1 C.B. 78.
Petitioner argues that for 1989 and 1991, respectively, of
the above adjustments made by respondent, respondent incorrectly
classified $44,264 for the partnership and $73,991 for
petitioners as costs of videos, as not currently deductible, and
as subject to straight-line depreciation. Petitioners claim that
such funds related to the cost of supplies for the Stores and
were properly expensed by the partnership and by petitioners.
No evidence supports petitioners’ contention. We sustain
respondent’s adjustments to current expenses and to depreciation
claimed relating to videos rented to customers.
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