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Circuit. The Court of Appeals for the Tenth Circuit concluded in
ABC Rentals, Inc. v. Commissioner, 142 F.3d 1200 (10th Cir.
1998), revg. and remanding T.C. Memo. 1994-601, that section
168(f)(1) does not preclude use of the income forecast method for
property like petitioners’ rent-to-own inventory. Since we
determined that petitioners’ rental units could not be
depreciated using the income forecast method and did not reach
respondent’s other arguments, the Court of Appeals directed us to
determine on remand:
whether taxpayers made a proper election under
section 168(f) and, if so, whether they improperly
applied the income forecast method because they
did not accurately forecast the income expected
over the life of the assets and did not make an
adjustment for salvage value.
ABC Rentals, Inc. v. Commissioner, 142 F.3d at 1211.
In ABC Rentals, Inc. v. Commissioner, T.C. Memo. 1999-14
(ABC Rentals II), we held that Guaranteed Rental Systems, Inc.
(Guaranteed), failed to make a proper election of the income
forecast method for its taxable year ending December 31, 1987,
and that ABC Rentals of San Antonio, Inc. (ABC), failed to make a
proper election for its taxable year ending May 31, 1987. We
held 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 had stipulated that both Guaranteed
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