Rev. Rul. 67-272

Reconsideration has been given to Revenue Ruling 62-92, C.B. 1962-1, 29, in light of the decision of the Supreme Court of the United States in Fribourg Navigation Company, Inc. v. Commissioner , 383 U.S. 272 (1966), Ct. D. 1909, C.B. 1966-2, 60.

Revenue Ruling 62-92holds that the deduction for depreciation of an asset shall be adjusted in the year of disposition so that the deduction is limited to the amount, if any, by which the adjusted basis of the property at the beginning of the year exceeds the amount realized from the sale or exchange.

In view of the Fribourg decision, the allowable depreciation deduction for any open taxable year (including the year in which a depreciable asset is sold, transferred or otherwise disposed of) may be adjusted whenever, in the light of the relevant facts known or fairly ascertainable as of the end of any such open year, it appears that the estimate of useful life or salvage value, on the basis of which a depreciation deduction has been claimed, is unreasonable. Under such circumstances the adjustment for any open taxable year may be made without regard to whether a depreciation deduction in a previous return had been accepted.

However, nothing in this Revenue Ruling alters the policy of the Internal Revenue Service with respect to depreciation adjustments in general, as to which see Revenue Ruling 90, C.B. 1953-1, 43, and Revenue Ruling 91, C.B. 1953-1, 44, as clarified by Revenue Procedure 57-18, C.B. 1957-1, 748. See also section 1.167(a)-1(c) of the Income Tax Regulations which provides in part: `Salvage value shall not be changed at any time after the determination made at the time of acquisition merely because of changes in price levels .' Emphasis supplied.

To the extent that Revenue Ruling 62-92, C.B. 1962-1, 29, holds that without regard to the reason therefor, adjustment for depreciation in the year of disposition shall be made in all cases where the sale price exceeds the adjusted basis at the beginning of the year of disposition, it is modified.