[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)-4]

[Page 1006]
 
                       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)-4  Other methods.

    (a) Under section 167(b)(4) a taxpayer may use any consistent method 
of computing depreciation, such as the sinking fund method, provided 
depreciation allowances computed in accordance with such method do not 
result in accumulated allowances at the end of any taxable year greater 
than the total of the accumulated allowances which could have resulted 
from the use of the declining balance method described in section 
167(b)(2). This limitation applies only during the first two-thirds of 
the useful life of the property. For example, an asset costing $1,000 
having a useful life of six years may be depreciated under the declining 
balance method in accordance with Sec. 1.167(b)-2, at a rate of 33\1/3\ 
percent. During the first four years or \2/3\ of its useful life, 
maximum depreciation allowances under the declining balance method would 
be as follows:

------------------------------------------------------------------------
                                     Current     Accumulated
                                  depreciation  depreciation    Balance
------------------------------------------------------------------------
Cost of asset...................  ............  ............      $1,000
First year......................         $333          $333          667
Second year.....................          222           555          445
Third year......................          148           703          297
Fourth year.....................           99           802          198
------------------------------------------------------------------------


An annual allowance computed by any other method under section 167(b)(4) 
could not exceed $333 for the first year, and at the end of the second 
year the total allowances for the two years could not exceed $555. 
Likewise, the total allowances for the three years could not exceed $703 
and for the four years could not exceed $802. This limitation would not 
apply in the fifth and sixth years. See section 167(c) and Sec. 
1.167(c)-1 for restriction on the use of certain methods.
    (b) It shall be the responsibility of the taxpayer to establish to 
the satisfaction of the Commissioner that a method of depreciation under 
section 167(b)(4) is both a reasonable and consistent method and that it 
does not produce depreciation allowances in excess of the amount 
permitted under the limitations provided in such section.