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Inc., a bank holding company incorporated in the State of
Delaware, which then changed its name to U.S. Bancorp
(petitioner). West One was a calendar year taxpayer that used
the accrual method of accounting for 1989 and 1990, the tax years
in issue.
The leases at issue in this case were between West One as
lessee and IBM Credit Corp. (ICC) as lessor. For purposes of
leasing computer equipment, ICC uses a document captioned "Term
Lease Master Agreement" (the Master Agreement), which contains an
umbrella set of terms. Customers of ICC sign the Master
Agreement, whose terms then govern all future lease transactions
between ICC and the customer. When a customer enters into an
individual lease transaction, it signs a document captioned "Term
Lease Supplement" (Supplement), which expressly incorporates the
terms of the Master Agreement and contains a description of the
leased equipment, price terms, financing arrangements, and other
factors unique to the transaction. The Master Agreement
explicitly provides that the lease cannot be canceled and does
not provide for a specific charge in case of early termination of
the lease or for a formula for computing any such charge.
West One, at the time still named Moore Financial, executed
the Master Agreement with ICC in March 1989. In August 1989,
West One leased an IBM 3090 mainframe computer (the 3090) from
ICC (the First Lease). The lease term commenced August 30, 1989,
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