- 12 - demonstrated how income dropped off after the fourth or fifth quarters of operation. Petitioner’s argument is unpersuasive. The material fact is that petitioner depreciated its equipment ratably over a 2-year period. This fact is undisputed. The tax returns for the years in issue and the record show that petitioner used a method that was defined by a “term of years” and that petitioner did not use the income forecast method. The income forecast method requires the application of a fraction, the numerator of which is the income from the gaming equipment for the taxable year, and the denominator is the forecasted or estimated total income to be derived from the gaming equipment during its useful life. See ABC Rentals of San Antonio, Inc. v. Commissioner, T.C. Memo. 1999-14; Rev. Rul. 60-358, 1960-2 C.B. 68. This fraction is multiplied by the cost of the equipment that produced income during the taxable year after an appropriate adjustment for estimated salvage value. Rev. Rul. 60-358, 1960-2 C.B. at 69. The tax returns show that petitioner calculated the depreciation deduction using the straight-line method over 2 years, taking 50 percent in the year the equipment was placed in service, then 50 percent the following year. In order to use the income forecast method, income must be forecasted. Petitioner prepared the income schedules submitted to the Appeals Office long after it filed its tax returns; therefore, we conclude thatPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
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