[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.167(b)-0]

[Page 991]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.167(b)-0  Methods of computing depreciation.

    (a) In general. Any reasonable and consistently applied method of 
computing depreciation may be used or continued in use under section 
167. Regardless of the method used in computing depreciation, deductions 
for depreciation shall not exceed such amounts as may be necessary to 
recover the unrecovered cost or other basis less salvage during the 
remaining useful life of the property. The reasonableness of any claim 
for depreciation shall be determined upon the basis of conditions known 
to exist at the end of the period for which the return is made. It is 
the responsibility of the taxpayer to establish the reasonableness of 
the deduction for depreciation claimed. Generally, depreciation 
deductions so claimed will be changed only where there is a clear and 
convincing basis for a change.
    (b) Certain methods. Methods previously found adequate to produce a 
reasonable allowance under the Internal Revenue Code of 1939 or prior 
revenue laws will, if used consistently by the taxpayer, continue to be 
acceptable under section 167(a). Examples of such methods which continue 
to be acceptable are the straight line method, the declining balance 
method with the rate limited to 150 percent of the applicable straight 
line rate, and under appropriate circumstances, the unit of production 
method. The methods described in section 167(b) and Sec. Sec. 1.167(b)-
1, 1.167(b)-2, 1.167(b)-3, and 1.167(b)-4 shall be deemed to produce a 
reasonable allowance for depreciation except as limited under section 
167(c) and Sec. 1.167(c)-1. See also Sec. 1.167(e)-1 for rules 
relating to change in method of computing depreciation.
    (c) Application of methods. In the case of item accounts, any method 
which results in a reasonable allowance for depreciation may be selected 
for each item of property, but such method must thereafter be applied 
consistently to that particular item. In the case of group, classified, 
or composite accounts, any method may be selected for each account. Such 
method must be applied to that particular account consistently 
thereafter but need not necessarily be applied to acquisitions of 
similar property in the same or subsequent years, provided such 
acquisitions are set up in separate accounts. See, however, Sec. 
1.167(e)-1 and section 446 and the regulations thereunder, for rules 
relating to changes in the method of computing depreciation, and Sec. 
1.167(c)-1 for restriction on the use of certain methods. See also Sec. 
1.167(a)-7 for definition of account.