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assets placed in service in tax years beginning before 1994” (and
“GDS and ADS deductions for assets placed in service in tax years
beginning before 1995”, respectively) and “ACRS and other
depreciation”, but not on the line for “Property subject to
section 168(f)(1) election”. On its 1995 and 1996 tax returns,
however, petitioner attached schedules to the Forms 4562 that
included: (1) A description of the property depreciated; (2) the
date acquired; (3) the basis for depreciation; (4) the
depreciation allowed in earlier years; (5) the method of figuring
depreciation; (6) the life, rate, or recovery period; and (7) the
deduction for that year. On these schedules, petitioner reported
that it depreciated its gaming equipment using the straight-line
method over a 2-year recovery period.
On July 2, 1999, petitioner filed Forms 1120X, Amended U.S.
Corporation Income Tax Return, amending its returns for the 1994,
1995, and 1996 tax years. In each amended return, petitioner
included the following statement:
As per IRC section 168(f)(1), the Taxpayer opted out of
MACRS, and is instead depreciating its gaming equipment
under an alternate method of depreciation based upon
obsolescence due to a combination of changes in
technology, changes in law, market competition, income
generation from leasing the equipment, and the average
term of the Taxpayer’s leases for such equipment.
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