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Rev. Rul. 67-338


Rev. Rul. 67-338; 1967-2 C.B. 102

DATED
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Citations: Rev. Rul. 67-338; 1967-2 C.B. 102

Revoked by Rev. Rul. 72-491

Rev. Rul. 67-338

Advice has been requested whether the declining balance method of computing depreciation, with a rate of one and one-half times (150 percent) the applicable straight line rate, may be substituted for the declining balance method, with a rate of twice (200 percent) the appropriate straight line rate, in the situation described below.

A taxpayer acquired an item of "used" depreciable property and computed depreciation on the property by using the double declining balance method. The taxpayer and the examining agent agree that the use of the double declining balance method is not permitted under section 167(c) of the Internal Revenue Code of 1954, for computing depreciation on taxpayer's "used" property. The taxpayer contends, however, that he should be permitted to substitute the declining balance method with a rate of 150 percent since he could have chosen the 150 percent rate for the first taxable year the property was acquired.

Section 1.167(b)-1(a) of the Income Tax Regulations provides, in part, that the straight line method of computing depreciation shall be used in all cases where the taxpayer has not adopted a different acceptable method of computing depreciation. Since the taxpayer's used property does not qualify for the double declining balance method, under section 167(c) of the Code, that method is not an acceptable one for computing depreciation on such property.

Accordingly, where the taxpayer erroneously used the double declining balance method of computing depreciation on a "used" depreciable asset, he may not substitute the declining balance method, with a 150 percent rate, or any other method other than the straight line method. The straight line method must be used for all taxable years for which the periods of limitations have not expired, and for subsequent taxable years. The taxpayer may, however, file an application on Form 3115, Application for Change in Accounting Method, to change his method of computing depreciation for succeeding years.r

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