Par. 2. Sections 1.167(n)-0 through 1.167(n)-7 are added to read as follows:
(a) Overview. This section and §§ 1.167(n)-2 through 1.167(n)-7 provide rules for computing depreciation allowances under section 167 for property depreciated using the income forecast method. Because the income forecast method is only appropriate for property with unique income earning characteristics, only property specified in § 1.167(n)-5 may be depreciated under the income forecast method. A taxpayer using the income forecast method generally computes depreciation allowances each year based upon the ratio of current year income to forecasted total income from the property as described in § 1.167(n)-4. Current year income and forecasted total income are determined in accordance with the provisions of § 1.167(n)-3. In addition, a taxpayer must determine depreciable basis for income forecast property in accordance with the basis rules of § 1.167(n)-2. Property depreciated under the income forecast method generally is subject to the look-back rules of § 1.167(n)-6 whereby taxpayers must determine the amount of interest owed on any hypothetical underpayment of tax, or due on any hypothetical overpayment of tax, attributable to the use of estimated income in the computation of income forecast depreciation. Under these rules, look-back computations must be performed in specified recomputation years, which are generally the 3rd and 10th taxable years after the taxable year that the property is placed in service.
(b) Method of accounting —(1) In general. The computation of depreciation under the income forecast method is elected on a property-by-property basis, and is a method of accounting under section 446 that may not be changed without the consent of the Commissioner. However, a change in forecasted total income in accordance with the rules of § 1.167(n)-4 is not a change in method of accounting requiring the Commissioner's consent.
(2) Election of the income forecast method. A taxpayer elects the income forecast method by computing allowances for depreciation for the eligible property in accordance with the provisions of this section and §§ 1.167(n)-2 through § 1.167(n)-6. See § 1.167(n)-5 for rules regarding eligible property.