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II. Contentions of the Parties
As detailed above, petitioner has conceded that each item of
the Equipment should be reclassified and depreciated in
accordance with MACRS, alternative depreciation system rules.
The parties agree that according to those rules, each item of the
Equipment should be depreciated using the straight-line method
and a 10-year recovery period.
Respondent argues that the reclassification is a change in
method of accounting because the term “useful life” is not
synonymous with the term “recovery period” for purposes of
section 1.446-1(e)(2)(ii), Income Tax Regs. Petitioner, however,
relies on our holding in Brookshire Bros. Holding, Inc. & Subs.
v. Commissioner, T.C. Memo. 2001-150, affd. ___ F.3d ___ (5th
Cir., Jan. 29, 2003), to argue that the reclassification is not a
change in method of accounting. In Brookshire Bros. Holding,
Inc. & Subs., we held that the taxpayer’s change in MACRS
classification of an asset, which resulted in a change in both
the depreciation method and the recovery period, was excluded
from the definition of a change in method of accounting by reason
of analogy to the useful life exception contained in section
1.446-1(e)(2)(ii)(b), Income Tax Regs.
III. Analysis
Petitioner did not alter its overall plan of accounting for
income and deductions. Rather, respondent required that
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