Green Forest Manufacturing Inc. - Page 6




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                                       OPINION                                        
          I.  General Rules                                                           
               A.  Depreciation Deductions                                            
               Depreciation deductions are primarily governed by sections             
          167 and 168.  Section 168 describes a specific depreciation                 
          system for tangible property.  As part of the Tax Reform Act of             
          1986, Pub. L. 99-514, secs. 201, 203, 100 Stat. 2122, 2143,                 
          Congress replaced the accelerated cost recovery system with                 
          MACRS, effective generally for property placed in service after             
          December 31, 1986, and section 168 was amended accordingly.  As             
          such, depreciation deductions for tangible property placed in               
          service after 1986 are generally determined under section 168.              
          Section 168 prescribes two systems for determining depreciation             
          deductions:  (1) The general depreciation system in section                 
          168(a), and (2) the alternative depreciation system in section              
          168(g).  Taxpayers are required to use the alternative                      
          depreciation system for “any tangible property which during the             
          taxable year is used predominantly outside the United States”.              
          Sec. 168(g)(1)(A).                                                          
               B.  Adjustments Pursuant to Section 481                                
               Section 481(a) provides for adjustments required by changes            
          in a taxpayer’s method of accounting.  If a taxpayer has changed            
          his method of accounting, the taxpayer must take “into account              
          those adjustments which are determined to be necessary solely by            






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Last modified: May 25, 2011