U.S. Bancorp and Its Consolidated Subsidiaries - Page 16

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          First Lease was terminated upon the express condition that                  
          petitioner finance the replacement equipment with ICC indicate              
          that the termination of the First Lease and the initiation of the           
          Second Lease were integrated, not isolated, events.  So also, the           
          Term Lease Supplement covering the replacement equipment carries            
          out the Agreement by providing that the rollover charge is                  
          financed by being paid with interest over the term of the Second            
          Lease by a series of level payments along with the rental                   
          payments under the Second Lease for the replacement equipment.              
               The rollover charge is therefore properly viewed as a cost             
          of entering into the Second Lease and not merely as an isolated             
          fee for terminating the First Lease.  Because the termination of            
          the First Lease and the initiation of the Second Lease were                 
          integrated events, the obligation to pay the rollover charge was            
          incurred by petitioner not only to terminate the First Lease but            
          more importantly, as Mr. Egan explains, to obtain a larger                  
          capacity computer; that is, to replace the equipment covered by             
          the First Lease with equipment covered by the Second Lease.                 
          Petitioner’s incurring the obligation to pay the rollover charge            
          therefore is properly characterized as a cost of petitioner's               
          realization of future benefits provided by the Second Lease.                
              Petitioner's attempt to isolate the rollover charge, as only           
          relating to the First Lease and not providing any future                    
          benefits, ignores the integrated character of the termination of            





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