Rev. Rul. 67-248

Reconsideration has been given to Revenue Ruling 57-352, C.B. 1957-2, 150, which holds, in part, that for taxable years ending after December 31, 1953, the declining balance method of computing depreciation, using a rate not in excess of one and one-half times (150 percent) the applicable straight-line rate, may be used for used tangible property acquired after December 31, 1953, provided such method results in a reasonable allowance for depreciation.

The Internal Revenue Service has found that the use of the declining balance method of computing depreciation, based on a mathematical formula more favorable than the straight-line formula, on used tangible business property having a useful life of less than three years does not ordinarily result in a reasonable allowance for depreciation. It is only in rare and unusual circumstances that a taxpayer has been able to establish that the use of such a declining balance method of computing depreciation on used property having a useful life of less than three years results in a reasonable allowance.

When the extraordinary facts in any case demonstrate an allowance so computed to be reasonable, such an allowance may be taken as a deduction. However, a taxpayer must sustain the burden of proof that the deduction is reasonable under all the facts and circumstances.

Accordingly, it is held that a taxpayer may not use the declining balance method of computing depreciation, based on a mathematical formula more favorable than the straight-line formula, on used tangible business property having a useful life to the taxpayer of less than three years, except in rare and extraordinary cases as justified by all the facts and circumstances. For use of the declining balance method of computing depreciation using a rate not in excess of one and one-half times (150 percent) the applicable straight-line rate for new property acquired after December 31, 1953, see Holder Drive-Ur-Self, Inc. v. Commissioner , 43 T.C. 202 (1964).

Revenue Ruling 57-352 is clarified to remove any possible implication that it sanctions the use of the declining balance method of computing depreciation for used tangible business property that would be inconsistent with the foregoing conclusion.