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Depreciation Issue
Petitioner deducted on his 1992 return depreciation for
property placed in service in 1986. Petitioner indicated on his
return that the property had a 5-year class life and was subject
to the half-year convention.18 Thus, based on the admissions
contained in petitioner’s tax return, the property would have
been fully depreciated in 1991.
At trial, petitioner claimed that his accountant made a
mistake, because the property should have had a 7-year class life
rather than a 5-year class life. Petitioner introduced no
evidence to support his contention that the property should have
had a 7-year class life rather than a 5-year class life and no
evidence that he had not recognized depreciation deductions
totaling the full cost of the property in previous years. See
sec. 1016(a)(2) (basis reduced by all depreciation allowed, but
not less than amount allowable). Petitioner therefore failed to
substantiate his deduction for depreciation, and the deduction is
disallowed.
Unreported Income Issue
Every individual liable for tax is required to maintain
books and records sufficient to establish the amount of his or
18 The convention that petitioner applied to depreciate his
computer is not clear from the record. However, as 5-year
property depreciated using the straight-line method, the computer
should also have been fully depreciated by no later than 1991.
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