- 2 -
replacement equipment with ICC. The rollover agreement
provided for a $2.5 million rollover charge to be paid
by P. Shortly thereafter, pursuant to the rollover
agreement, P leased a more powerful mainframe computer
from ICC for a 5-year term. ICC financed P's
obligation to pay the $2.5 million rollover charge over
the 5-year term of the second lease.
Held: The $2.5 million rollover charge P incurred
is not currently deductible in the year of termination
of the first lease but must be capitalized and
amortized over the 5-year term of the second lease.
Richard A. Edwards and David W. Brown, for petitioner.
William P. Boulet, Jr. and Virginia L. Hamilton, for
respondent.
OPINION
BEGHE, Judge: This matter is before the Court on the
parties' motions for partial summary judgment filed under Rule
121.2 Petitioner's principal office was located in Portland,
Oregon, when it filed the petition.
The sole issue for decision is whether the charge incurred
by a lessee in terminating a lease of a mainframe computer and
simultaneously initiating a new lease of a more powerful
mainframe computer with the same lessor is deductible in the year
incurred or must be capitalized and amortized over the 5-year
2 All Rule references are to the Tax Court Rules of Practice
and Procedure. All section references are to the Internal
Revenue Code in effect for the years at issue.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011