hoppers, special service, 21 years; refrigerator cars (nonmechanical), 18 years; all other cars, 21 years; cabooses, 15 years; all flatcars, 34 years; and all gondolas, 15 years. The average service lives outlined above resulted from an analysis of a 30-year experience band charting the retirement experience of Railway rolling stock. Petitioner's expert witness, Mr. Cormier, relied upon the actuarial retirement rate methodology to determine the useful life for rolling stock in the range of 8.75-13 years. The actuarial method purports to analyze the past retirement experience of depreciable assets for purposes of estimating the future service life of similar assets.14 In Chesapeake & Ohio Ry. Co. v. Commissioner, 64 T.C. 352 (1975), the Court emphasized certain factors to be considered in a proper evaluation of the results reached under this method: The strength of the actuarial method lies in its consideration of both the number and age of not only past retirements but also the units remaining in service. However, because the results of the actuarial method reflect all retirements for whatever cause, it is essential that in evaluating those results one ascertain the cause of past retirements and apply judgment as to whether they may be expected to continue in the future. Moreover, the reliability of the results may be adversely affected by the small size of the groups of property observed, infrequent observations of the property, or the retirement of a relatively large number of units for a very special cause. *** [Chesapeake & Ohio Ry. Co. v. Commissioner, supra at 374.] Mr. Cormier's testimony readily reveals the shortcomings of the useful life study prepared by Valtec Associates, Inc. (Valtec). It appears that Valtec played no part in gathering the data or in classifying the hundreds of assets encompassed by the data base. No effort was made to place the various kinds of rolling stock in separate categories for purposes of making a more meaningful analysis. No effort was made to determine the causes for the retirement of the assets contained in the study and, consequently, it would be 14"The fundamental principle of the actuarial method is that groups of similar assets possess, on the average, similar service life characteristics. The goal of this statistical approach for determining the useful life of an asset is to generate a survivor curve for the particular asset and then to analyze that curve to determine that asset's useful life. Application of the actuarial method involves three phases: data gathering and mathematical calculations, life analysis, and life estimation. *** [Burlington Northern Inc. v. United States, 230 Ct. Cl. 102, 106, 676 F.2d 566, 569 (1982).]" impossible to apply informed judgment as to the expected continuation of such causes in the future. Moreover, the record shows that Valtec, in its study, failed to give proper attention to the presence of used assets in the data base which, of course, would have a material effect on the conclusions drawn from the study. Nor did Valtec consider any of the conditions under which the assets in question were used so as to exercise an informed judgment as to the likelihood that such conditions would continue to prevail. In short, the Valtec analysis was little more than a mechanical application of the actuarial method to a data base with no perceptible effort to observe the safeguards emphasized by this Court in prior cases which would augment the reliability of the results.15 We have also considered the testimony of Mr. Dehner, who was employed by Carland as assistant to the president from July 1973 to March 1975, and the testimony of Mr. Souter, who is employed by Kansas City Southern Railroad as superintendent of machinery. Both witnesses testified in broad general terms with respect to the perceived useful lives of the various categories of assets here involved. Apart from the bare recitation of the purported useful lives attributed to the various categories of leased assets, we are left essentially uninformed as to the underlying information relied upon by the witnesses in making such estimates. We have carefully considered all of the evidence bearing upon the useful life of the rolling stock in these categories (210-260). Upon careful consideration of the record as a whole, with particular emphasis upon the voluminous historical data in evidence which we consider uniquely relevant, we conclude that the average useful life of the assets in the categories (predominately rolling stock) here under consideration is 20 years. We have concluded that the income-forecast method of depreciation was an impermissible choice of method. Under the circumstances, we must agree with petitioner that it is now entitled to apply the double-declining-balance method under section 167(b) to compute a reasonable allowance for 15The computerized data base used by Valtec in its study was furnished by Kansas City Southern Industries, Inc. Mr. Cormier testified that the data base was received in mid-September, 1985. depreciation in the years here at issue under section 167(a) for the various categories of its leased assets. See Silver Queen Motel v. Commissioner, 55 T.C. 1101 (1971). Decision will be entered under Rule 155. GUY B. BAILEY, JR., AND LOIS M. BAILEY, ET AL.,1 Docket Nos. 10193-78, 12885-80, Filed March 31, 1988. 3781-85, 18288-85, 18721-85, 18790-85, 18966-85, 19016-85. Petitioner-husbands claimed deductions and investment tax credits in connection with motion pictures through their interests as limited partners in either of two partnerships. Held: 1. The partnerships did not acquire depreciable interests in the motion pictures but purchased contractual rights to payments contingent on the success of the respective motion picture. Durkin v. Commissioner, 87 T.C. 1329 (1986), and Tolwinsky v. Commissioner, 86 T.C. 1009 (1986), followed. 2. The partnerships are entitled to depreciate their bases in the contractual rights and their bases are determined. 3. The partnerships were engaged in their motion picture activities for profit. 4. The partnerships' nonrecourse purchase money notes must be disregarded for tax purposes since the debts had no substance and thus are not includable in depreciable bases. 5. The partnerships are not entitled to interest deductions on payments made with respect to the purchase money notes. 6. The partnerships are entitled to use the income-forecast method based on their earnings from their contract rights. 7. The retroactive application of sec. 48(k), I.R.C. 1954, and sec. 804 of the Tax Reform Act of 1976 is not unconstitutional. Petitioner-husbands are entitled to investment tax credits as lenders or guarantors with respect to the motion 'Cases of the following petitioners are consolidated herewith: Guy B. Bailey, Jr., and Lois M. Bailey, docket Nos. 10193-78 and 4505-82; Norman B. Levy and Helene Levy, docket No. 12885-80; Henry Milgram and Toby Milgram, docket Nos. 21771-81 and 19016-85; Bernard B. Neuman and Miriam Neuman, docket No. 3781-85; William Milgram and Joyce Milgram, docket No. 18288-85; William Milgram and Harriet Milgram, docket No. 18721-85; William Milgram 18790-85; and Henry Milgram and Carol Milgram, docket No. 18966-85. pictures under the regulations promulgated pursuant to sec. 8. Determinations are made as to substantial underpay- Richard A. Levine, Carlton M. Smith, and Albert Rosenblum, for the petitioners. Gerald A. Thorpe, for the respondent. OPINION SCOTT, Judge: These cases were assigned to and heard by Special Trial Judge John J. Pajak, pursuant to the provisions of section 7456 (redesignated as section 7443A(b) by the Tax Reform Act of 1986, Pub. L. 99-514, section 1556, 100 Stat. 2755) of the Code and Rule 180 et seq.2 The Court agrees with and adopts the Special Trial Judge's opinion which is set forth below. OPINION OF THE SPECIAL TRIAL JUDGE PAJAK, Special Trial Judge: In these consolidated cases,3 Respondent determined deficiencies in Federal income taxes due from petitioners as follows: 2 All section references are to the Internal Revenue Code of 1954 as in effect during the taxable years in question, unless otherwise indicated. All Rule references are to the Tax Court Rules of Practice and Procedure. 3These cases were consolidated for the purpose of deciding issues relating to two partnerships, Persky-Bright Associates and Vista Co. Resolution of these issues will allow entry of decision under Rule 155 in the following docket numbers: Guy B. Bailey, Jr., and Lois M. Bailey, docket No. 4505-82; and Bernard B. Neuman and Miriam Neuman, docket No. 3781-85. Since other issues remain in 8 of the 10 cases which are not automatically resolved by resolution of the issues relating to Persky-Bright Associates and Vista Co., appropriate orders shall be entered for these cases. Jurisdiction shall be retained in the following cases for resolution of issues relating to Barclay Associates, another partnership of which Lester Persky and Richard S. Bright are, directly or indirectly, general partners: Henry Milgram and Toby Milgram, docket Nos. 21771-81 and 19016-85; William Milgram and Harriet Milgram, docket No. 18721-85; William Milgram, docket No. 18790-85; Henry Milgram and Carol Milgram, docket No. 18966-85. The following cases shall be restored to the general docket for trial of issues unrelated to any partnership of which Lester Persky or Richard S. Bright are, directly or indirectly, general partners: Guy B. Bailey, Jr., and Lois M. Bailey, docket No. 10193-78; Norman B. Levy and Helene Levy, docket No. 12885-80; and William Milgram and Joyce Milgram, docket No. 18288-85. Respondent also determined an addition to tax under section 6651(a)(1) in the amount of $1,834.25 for the year 1974 in docket No. 10193-78. Certain issues in these cases were severed and consolidated for the purposes of trial, briefing, and opinion. These issues arise out of activities of two partnerships, PerskyBright Associates (Persky-Bright) and Vista Co. (Vista). After concessions, the issues for decision are: (1) Whether the partnerships purchased interests in motion pictures, and, if so, the nature of their purchases; (2) whether the partnerships constituted activities not engaged in for profit within the meaning of section 183; (3) whether the nonrecourse notes should be included in the basis of the partnerships' interests in the motion pictures, and, if not, the determination of the basis of the partnerships' interests; (4) whether the partnerships may deduct interest on the |