- 7 -
Associates, Inc. v. Commissioner, 84 T.C. 21, 48 (1985); O'Dell &
Co. v. Commissioner, 61 T.C. 461, 467 (1974). Because each of
petitioner's covenants not to compete was entered into prior to
the effective date of current section 197, we must apply the law
as in effect for property acquired prior to August 11, 1993.
Section 1.167(a)-9, Income Tax Regs., provides that the
depreciation allowance includes an allowance for "normal"
obsolescence. If the taxpayer shows that the estimated useful
life previously used should be shortened by reason of
obsolescence greater than had been assumed in computing the
useful life, a change to the new and shorter life will be
permitted.
"Extraordinary obsolescence" however, refers to the sudden
loss or termination of the usefulness of depreciable property
caused by some unexpected and unforeseen external force.
Extraordinary obsolescence results in either the shortening of
previously determined useful life if the obsolescence occurs over
a period greater than 1 taxable year, or in a loss if the useful
life is completely and suddenly terminated within 1 taxable year.
Coors Porcelain Co. v. Commissioner, 52 T.C. 682, 689-692 (1969),
affd. 429 F.2d 1 (10th Cir. 1970); sec. 1.167(a)-8, -9, Income
Tax Regs.
Section 1.167(a)-9, Income Tax Regs., applies in situations
where a taxpayer seeks to shorten the useful life of an
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