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software was to be made available to Sprint at NTI's then-current
price for those features or services.
Although there were significant limitations on Sprint's
rights in the software, under section 8.6 of the sales agreement,
Sprint was given the right, upon transfer of title to the digital
switch, to assign the license for the software or, upon a lease
or other nonpermanent transfer, sublicense the software, provided
the assignee or sublicensee agreed in writing to the above terms.
Around 1988 or 1989, Sprint effected a trade of title of
approximately 30 DMS-100 type digital switches with ConTel Co.,
another telephone company. None of the switches were actually
moved, and service to the customers was not interrupted.
Although neither party specifically notified NTI, the trade
received sufficient attention in the industry to give NTI at
least constructive notice of the trade. NTI did not object to
the trade.
Respondent determined in the notice of deficiency that the
costs of the software are not eligible for either the ITC or
accelerated depreciation under the ACRS because (1) Sprint
received a license to use the software rather than owning the
software and (2) in any event, the software is not tangible
property.
Sprint acknowledges that the substantial value of encoded
programming on software, in general, relates to the programming's
conceptual or intangible value, but nonetheless contends that
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