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A prepayment for multiyear insurance coverage creates an asset
having a useful life longer than a taxable year, which must be
capitalized. See Higginbotham-Bailey-Logan Co. v. Commissioner,
8 B.T.A. 566, 577 (1927); sec. 1.461-4(g)(8), Example (6), Income
Tax Regs.; see also USFreightways Corp. v. Commissioner, 113 T.C.
___ (1999); Johnson v. Commissioner, supra at 488; Hinshaw’s,
Inc. v. Commissioner, T.C. Memo. 1994-327. The prepaid insurance
is an intangible, and its coverage period gives it a determinable
useful life, making it eligible for a “depreciation allowance”.
Sec. 1.167(a)-3, Income Tax Regs. The rules for computing the
proper period for a depreciation allowance are provided in
section 1.167(a)-10(b), Income Tax Regs., which states in
relevant part:
(b) The period for depreciation of an asset shall
begin when the asset is placed in service and shall end
when the asset is retired from service. A
proportionate part of one year’s depreciation is
allowable for that part of the first and last year
during which the asset was in service. * * *
In general, “an asset is ‘placed in service’ for depreciation
purposes when it is acquired and available for use.” Clairmont
v. Commissioner, 64 T.C. 1130, 1136 (1975), affd. without
published opinion 538 F.2d 332 (8th Cir. 1976). Petitioners’
claim of a full year’s amortization in the first year that a
multiyear insurance policy is acquired or placed in service,
without regard to when during the year the policy was in fact
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