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used petitioner’s useful lives experience, they used different
categories within which to analyze the useful lives of the
accounts. Respondent’s expert sought to replicate Rose’s
categories for its accounts, whereas petitioner’s expert used
petitioner’s categorization.
That difference resulted in respondent’s expert’s carving
out one more category than petitioner’s expert had. Respondent’s
expert used a 10.3-year life in a category that did not exist in
petitioner’s business practice or nomenclature. In addition to
those differing approaches, the parties disagree about the
interpretation and application of a regulation providing for
approaches to be used in determining the useful lives of acquired
assets.
In particular, section 1.167(a)-1(b), Income Tax Regs.,
requires the use of a taxpayer’s experience with respect to the
useful lives of similar property in order to determine the useful
life of an acquired asset.22 In these cases, petitioner and
22 Sec. 1.167(a)-1(b), Income Tax Regs., in pertinent part,
provides the following standards and approach for determining the
useful life of “similar” assets:
For the purpose of section 167 the estimated useful
life of an asset is not necessarily the useful life
inherent in the asset but is the period over which the
asset may reasonably be expected to be useful to the
taxpayer in his trade or business or in the production
of his income. This period shall be determined by
reference to his experience with similar property
(continued...)
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