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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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Last modified: May 25, 2011