SECTION 4. EFFECTIVE DATE

This revenue procedure is effective April 29, 2002, and applies to Bonds issued after March 9, 2002.

DRAFTING INFORMATION

The principal author of this revenue procedure is Zoran Stojanovic of the Office of Assistant Chief Counsel (Ex

empt Organizations/Employment Tax/ Government Entities). For further information regarding this revenue procedure, contact Mr. Stojanovic at (202) 622–3980 (not a toll-free call).

2002–17 I.R.B. 801 April 29, 2002

equipment and used in motor freight transportation. Rev. Rul. 68–134 (1968–1 C.B. 63) discusses Zelco and holds that the principles of Rev. Rul. 59–249 are applicable to tires in the case of a taxpayer who is a purchaser-lessor of new commercial trucking equipment.

Accordingly, truck, trailer, and tractor tires are not treated as part of the vehicle for depreciation purposes. Rather, these tires are considered to be separate assets and, as such, their cost is currently deductible by a taxpayer provided they are consumable in less than one year. However, the cost of truck, trailer, and tractor tires with an average useful life to a taxpayer of more than one year cannot be currently deducted as an operating expense. Their cost must be capitalized and recovered through depreciation. Because truck, trailer, and tractor tires are not considered part of the vehicle for depreciation purposes, they are not associated with any of the specific transportation assets included in the specific asset classes of Rev. Proc. 87–56 (that is, asset classes 00.241, 00.242, 00.26, and 00.27). Therefore, in accordance with § 168 and Rev. Proc. 87–56, all truck, trailer, and tractor tires that must be capitalized, whether original or replacement, are depreciated as assets used in specific business activities (that is, asset classes 01.1 through 80.0 of Rev. Proc. 87–56). For example, if a taxpayer’s business activity is described in asset class 42.0, Motor Transport—Freight, original and replacement truck, trailer, and tractor tires, like the other assets in this class, would have a 5-year recovery period for GDS purposes and an 8-year recovery period for ADS purposes.

.04 Under § 446(b), the Commissioner has broad authority to determine whether a method of accounting clearly reflects income. If a taxpayer’s method of accounting does not clearly reflect income, the computation of taxable income must be made under a method that, in the opinion of the Secretary, does clearly reflect income. See Thor Power Tool Co. v. Commissioner, 439 U.S. 522 (1979) (1979–1 C.B. 167); Commissioner v. Hansen, 360 U.S. 446 (1959) (1959–2 C.B. 460); § 1.446–1(c)(2)(ii).

.05 Section 446(e) and § 1.446–1(e) provide that, except as otherwise provided, a taxpayer must secure the consent

26 CFR 601.204: Changes in accounting periods and in methods of accounting. (Also Part I, §§ 167,168, 446, 481; 1.446–1, 1.481–1.)

Rev. Proc. 2002–27