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tax treatment of the remaining cost of the Improvements, $92,456
($127,067 less $15,872 (furniture, fixtures, and equipment) and
less $18,739 (payments made in lieu of rent)).
Also in 1995, petitioners (1) bought cash registers for the
Bakery for $3,475, and (2) placed in service a computer (75-
percent business usage) in which petitioners had a basis of
$2,865. Petitioners classified the cash registers and the
computer as 5-year property on their 1995 tax return and claimed
depreciation deductions in respect thereof for 1995 and 1996
using the 200-percent declining balance method and the midquarter
convention over a recovery period of 5 years. Respondent does
not dispute either petitioners’ classification of, or the amount
of, claimed depreciation deductions, for either the cash
registers or the computer.
In 1996, petitioners bought $5,059 of equipment for the
Bakery.5
5 So stipulated. As we interpret the parties’ stipulation,
any part of the $5,059 that petitioners are not allowed to
expense under sec. 179(a) (subject to the limitations of sec.
179(b)), discussed infra under II. Section 179 Election, shall be
capitalized and depreciated under MACRS as 7-year property, using
the 200-percent declining balance method and the midquarter
convention.
However, in the notice of deficiency, respondent determined
that on Dec. 30, 1996, petitioners placed in service equipment
(continued...)
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