90 T.C. 505 (1988)
CARLAND, INC., Petitioner
COMMISSIONER OF INTERNAL REVENUE, Respondent
United States Tax Court.
March 30, 1988
Petitioner was engaged in the business of leasing various categories of tangible property, predominantly railroad rolling stock, under fixed-term leases. Petitioner employed the income-forecast method keyed to the lease terms to compute the depreciation allowance under the statute for the leased assets.
Held 1. Petitioner's use of the income-forecast method to compute a reasonable allowance for depreciation under section 167 is inappropriate under the circumstances of this case. Petitioner is entitled to employ the double declining-balance method under section 167(b) to compute the depreciation allowance for the leased assets during the years at issue.
2. The useful lives and salvage values of the various categories of tangible assets determined.
J. Glenn Hahn, David E. Bass, David N. Zimmerman, and George D. Halper, for the petitioner.
James F. Kidd and James Cannon, for the respondent.
This case was assigned for trial or other disposition to Special Trial Judge James M. Gussis pursuant to section 7456(d) (redesignated section 7443A(b) by section 1556 of the Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2755) and Rule 180 et seq.  The Court agrees with and adopts the opinion of the Special Trial Judge, which is set forth below.
OPINION OF THE SPECIAL TRIAL JUDGE
GUSSIS, SPECIAL TRIAL JUDGE:
Respondent determined the following deficiencies in petitioner's Federal income taxes:
Petitioner filed an amendment to petition on August 28, 1985 raising certain alternative positions and on September 16, 1985 respondent filed an answer to the amendment to petition in which he determined increases in petitioner's income tax deficiencies for the years 1970 through 1975 as follows:
The issues are (1) whether petitioner is entitled to use the income forecast method in computing a reasonable allowance for depreciation under the provisions of section 167 with respect to any class of its leased equipment in the taxable years ended December 31, 1970 through 1975; (2) whether petitioner is entitled to use the income forecast method of depreciation in conjunction with appropriately assigned salvage values with respect to any class of its leased equipment; and (3) in the alternative, the determination of the average useful lives of the various classes of leased equipment to be used to compute a reasonable allowance for depreciation under section 167(b). FINDINGS OF FACT Some of the facts have been stipulated and they are herein incorporated by this reference. Carland, Inc., hereinafter referred to as Carland or petitioner, was incorporated on or about January 14, 1964 under the laws of the State of Delaware. Carland's principal office during the years 1970 through 1975 was in Kansas City, Missouri. During the years 1970 through 1975 Page 507
Carland's outstanding 100 shares of common stock, with a par value of $100, were owned by Veals, Inc. (75 shares) and M.T. (Bud) Marqua (25 shares). Veals, Inc. was a member of the Kansas City Southern Industries, Inc. (hereinafter Industries) consolidated group. During the years in issue Carland was the parent of a consolidated group which included Taxpediters, Inc. (taxable year 1970) and Trans-Serve, Inc. (taxable years 1970 through 1975). Carland, an accrual basis taxpayer, filed its consolidated corporation income tax return for the taxable years 1970 through 1975 with the Internal Revenue Service, Kansas City, Missouri. During the years 1964 through 1975 Carland was engaged in the activity of leasing various categories of tangible personal property which included railroad rolling stock, automotive equipment, railway roadway maintenance, aviation, communication and other miscellaneous equipment. Substantially all of Carland's leases for railroad equipment were five year primary terms with three one-year renewal options. Substantially all of petitioner's leases for automotive equipment were three year primary terms with five one-year renewal options. During the years 1970 through 1975 Carland entered into certain lease agreements with the following corporations (hereinafter the Related Lessees) which at all times here relevant were members of Industries' consolidated group:
| American-Coleman Co.
| Carthage Cablevision, Inc.
| Lindgren & White Construction Co.
| Mid-America T.V., Inc.
|| (Mid-America TV)
| North Baton Rouge Development Co.
| Systec Data Management, Inc.
During the years 1970 through 1975 Carland entered into certain lease agreements with the following corporations (hereinafter the Unrelated Lessees) which were not at any time here relevant members of the Industries or Carland consolidated group:
| Oliver Advertising, Inc.
| Servitron, Inc.
| Trans-Mark, Inc.
| Comet Industries, Inc.
| Gulf Oil Co., U.S., a division of Gulf Oil Corp.
| Jamestown Saw Mill Co.
| Smith Brothers Contracting
|| (Smith Bros.)
| Mid-America Export-Import Marketing & Consulting
During the years 1964 through 1969 Kansas City Southern Railway Co. (Railway) entered into 11 lease agreements with Carland relating to certain rolling stock, auto racks, automotive, communication, roadway maintenance, aviation and other equipment. During the years 1964 through 1969 Louisiana and Arkansas Railway Company (L & A) entered into 31 lease agreements with Carland relating to certain rolling stock, auto racks, locomotive engines and automotive, communication, roadway maintenance, aviation, electronic data processing and other equipment. During the years 1964 through 1969 NBRD and Lindgren each entered into a lease agreement with Carland relating to certain automotive equipment. During the years 1964 through 1969 Carthage entered into a lease agreement with Carland relating to certain communication equipment. During the years 1964 through 1969 Systec entered into four lease agreements with Carland relating to office furniture and equipment and certain automotive equipment. During the years 1964 through 1969 Trapp's entered into a lease agreement relating to office furniture and equipment. The lease agreements entered into by Carland with Related Lessees in the years 1964 through 1969 generally contained substantially similar terms and provisions which, except for minor modification, were incorporated into the lease agreements in later years. The 15 lease agreements entered into by Carland with Railway, L & A and NBRD in 1964 contained, inter alia, the following provisions: (a) designation of primary and renewal lease terms; (b) designation of rentals; (c) the manner in which the lessee is to instruct the lessor with respect to specific items of equipment required by the lessee; (d) lessee's duty to return the equipment in the same condition in which it was received by the lessee, ordinary wear and tear excepted; (e) lessee's obligation to pay rentals not relieved by destruction or damage to the equipment; (f) lessee's duty to maintain and repair the equipment at all Page 509
times (with the exception of the 1964 lease agreement with Railway which imposed this duty on the lessor); (g) lessee's duty to pay all license and registration fees, taxes, assessments and charges on the equipment and the lessor's right to reimbursement for all said amounts paid by lessor on lessee's behalf; (h) lessee's indemnification of the lessor from all claims and liabilities arising from lessee's use of the equipment; (i) lessor's right to be advised as to the location of the equipment and lessor's right to inspect the equipment; (j) lessor's right to treat lessee as purchaser of the equipment for purposes of the investment tax credit; (k) express agreement that the transaction is a lease only and nothing therein shall be construed as conveying any right, title or interest in said equipment other than as a lessee. The 22 lease agreements entered into between Carland, as lessor, and Railway and L & A, as lessees, during the taxable years 1965 through 1969 contained terms and conditions substantially identical to those listed above except for the following: (1) lessee's assumption of all risks of lose or damage to the equipment and lessee's duty to notify lessor of any substantial damage; (2) upon destruction of a unit, lessee is to pay lessor an amount equal to the unamortized value of such unit at time of payment; (3) lessee's duty to pay all costs, expenses, fees and charges incurred in connection with the use of the equipment; (4) an agreement that replacement parts and accessories added to the equipment by the lessee shall become property of the lessor unless the same can be disconnected from the equipment without impairing the function of said equipment; (5) the express agreement that the lessee is under no duty to order any of the equipment; and (6) lessor's right to assign the lease. The 12 lease agreements entered into during 1967, 1968 and 1969 between Carland, as lessor, and L & A,...