[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(e)-1]

[Page 1009-1011]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.167(e)-1  Change in method.

    (a) In general. [Reserved]. For further guidance, see Sec. 
1.167(e)-1T(a).
    (b) Declining balance to straight line. In the case of an account to 
which the method described in section 167(b)(2) is applicable, a 
taxpayer may change without the consent of the Commissioner from the 
declining balance method of depreciation to the straight line method at 
any time during the useful life of the property under the following 
conditions. Such a change may not be made if a provision prohibiting 
such a change is contained in an agreement under section 167(d). When 
the change is made, the unrecovered cost or other basis (less a 
reasonable estimate for salvage) shall be recovered through annual 
allowances over the estimated remaining useful life determined in 
accordance with the circumstances existing at the time. With respect to 
any account, this change will be permitted only if applied to all the 
assets in the account as defined in Sec. 1.167(a)-7. If the method of 
depreciation described in section 167(b)(2) (the decliningbalance method 
of depreciation using a rate not exceeding 200 percent of the straight 
line rate) is an acceptable method of depreciation with respect to a 
particular account, the taxpayer may elect under this paragraph to 
change to the straight line method of depreciation even if with respect 
to that particular account the declining balance method is permitted 
under a provision other than section 167(b)(2). Thus, for example, in 
the case of section 1250 property to which section 167(j)(1) is 
applicable, section 167(b) does not apply, but the declining balance 
method of depreciation using 150 percent of the straight line rate is an 
acceptable method of depreciation under section 167(j)(1)(B). 
Accordingly, the taxpayer may elect under this paragraph to change to 
the straight line method of depreciation with respect to such property. 
Similarly, if the taxpayer acquired used property before July 25, 1969, 
and adopted the 150 percent declining balance method of depreciation 
permitted with respect to such property under Sec. 1.167(b)-0(b), the 
taxpayer may elect under this paragraph to change to the straight line 
method of depreciation with respect to such property. The taxpayer shall 
furnish a statement with respect to the property which is the subject of 
the change showing the date of acquisition, cost or other basis, amounts 
recovered through depreciation and other allowances, the estimated 
salvage value, the character of the property, the remaining useful life 
of the property, and such other information as may be required. The 
statement shall be attached to the taxpayer's return for the taxable 
year in which the change is made. A change to the straight line method 
must be adhered to for the entire taxable year of

[[Page 1010]]

the change and for all subsequent taxable years unless, with the consent 
of the Commissioner, a change to another method is permitted.
    (c) Change with respect to section 1245 property. (1) In respect of 
his first taxable year beginning after December 31, 1962, a taxpayer may 
elect, without the consent of the Commissioner, to change the method of 
depreciation of section 1245 property (as defined in section 1245(a)(3)) 
from any declining balance method or sum of the years-digits method to 
the straight line method. With respect to any account (as defined in 
Sec. 1.167(a)-7), this change may be made notwithstanding any provision 
to the contrary in an agreement under section 167(d), but such change 
shall constitute (as of the first day of such taxable year) a 
termination of such agreement as to all property in such account. With 
respect to any account, this change will be permitted only if applied to 
all the section 1245 property in the account. The election shall be made 
by a statement on, or attached to, the return for such taxable year 
filed on or before the last day prescribed by law, including any 
extensions thereof, for filing such return.
    (2) When an election under this paragraph is made in respect of 
section 1245 property in an account, the unrecovered cost or other basis 
(less a reasonable estimate for salvage) of all the section 1245 
property in the account shall be recovered through annual allowances 
over the estimated remaining useful life determined in accordance with 
the circumstances existing at that time. If there is other property in 
such account, the other property shall be placed in a separate account 
and depreciated by using the same method as was used before the change 
permitted by this paragraph, but the estimated useful life of such 
property shall be redetermined in accordance with Sec. 1.167(b)-2, or 
1.167(b)-3, whichever is applicable. The taxpayer shall maintain records 
which permit specific identification of the section 1245 property in the 
account with respect to which the election is made, and any other 
property in such account. The records shall also show for all the 
property in the account the date of acquisition, cost or other basis, 
amounts recovered through depreciation and other allowances, the 
estimated salvage value, the character of the property, and the 
remaining useful life of the property. A change to the straight line 
method under this paragraph must be adhered to for the entire taxable 
year of the change and for all subsequent taxable years unless, with the 
consent of the Commissioner, a change to another method is permitted.
    (d) Change with respect to section 1250 property. (1) In respect of 
his first taxable year beginning after July 24, 1969, a taxpayer may 
elect, without the consent of the Commissioner, to change the method of 
depreciation of section 1250 property (as defined in section 1250(c)) 
from any declining balance method or sum of the years-digits method to 
the straight line method. With respect to any account (as defined in 
Sec. 1.167(a)-7) this change may be made notwithstanding any provision 
to the contrary in an agreement under section 167(d), but such change 
will constitute (as of the first day of such taxable year) a termination 
of such agreement as to all property in such account. With respect to 
any account, this change will be permitted only if applied to all the 
section 1250 property in the account. The election shall be made by a 
statement on, or attached to, the return for such taxable year filed on 
or before the last day prescribed by law, including extensions thereof, 
for filing such return.
    (2) When an election under this paragraph is made in respect of 
section 1250 property in an account, the unrecovered cost or other basis 
(less a reasonable estimate for salvage) of all the section 1250 
property in the account shall be recovered through annual allowances 
over the estimated remaining useful life determined in accordance with 
the circumstances existing at that time. If there is other property in 
such account, the other property shall be placed in a separate account 
and depreciated by using the same method as was used before the change 
permitted by this paragraph, but the estimated useful life of such 
property shall be redetermined in accordance with Sec. 1.167(b)-2 or 
Sec. 1.167(b)-3, whichever is applicable. The taxpayer shall maintain 
records which permit specific

[[Page 1011]]

identification of the section 1250 property in the account with respect 
to which the election is made and any other property in such account. 
The records shall also show for all the property in the account the date 
of the acquisition, cost or other basis, amounts recovered through 
depreciation and other allowances, the estimated salvage value, the 
character of the property, and the estimated remaining useful life of 
the property. A change to the straight line method under this paragraph 
must be adhered to for the entire taxable year of the change and for all 
subsequent taxable years unless, with the consent of the Commissioner, a 
change to another method is permitted.
    (e) Effective date. [Reserved]. For further guidance, see the first 
two sentences of Sec. 1.167(e)-1T(e).

[T.D. 6500, 25 FR 11402, Nov. 26, 1960, as amended by T.D. 6832, 30 FR 
8573, July 7, 1965; T.D. 7166, 37 FR 5245, Mar. 11, 1972; T.D. 9105, 69 
FR 7, Jan. 2, 2004]