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the enactment of section 168, the IRS continued to follow its
initial revenue ruling and extended the income forecast method to
videocassettes. See Rev. Rul. 89-62, 1989-1 C.B. 78. The
revenue rulings were based on the theory that these assets were
similar in character to television films.
Respondent’s position was also based upon this Court’s
decision in Carland, Inc. v. Commissioner, 90 T.C. 505 (1988),
affd. 909 F.2d 1101 (8th Cir. 1990). In Carland, Inc., we ruled
that the income forecast method could not be used to depreciate
physical assets whose economic usefulness could adequately be
measured by physical condition and the passage of time. On
appeal, the Court of Appeals for the Eighth Circuit affirmed our
holding that a taxpayer’s use of the income forecast method of
depreciation for certain leased equipment was improper as it
resulted in an unreasonable acceleration of depreciation. See
Carland, Inc. v. Commissioner, 909 F.2d 1101 (8th Cir. 1990),
affg. 90 T.C. 505 (1988). The Court of Appeals expressly
declined to address whether the income forecast method can ever
be appropriate for depreciating assets whose usefulness declines
over time through normal wear and tear. See id. at 1104. When
respondent took his position in the present case, it was
consistent with the published revenue rulings and with our
decision in the Carland case. Consequently, respondent’s
position was soundly grounded in law and fact and was accordingly
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