ABC Rentals of San Antonio, Inc. - Page 6

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          rental anticipated to be received on each rental unit (except for           
          initial rental contracts on rental unit purchases as transfers              
          between companies as discussed below) would be 300 percent of its           
          initial cost.  This method of determining the total gross rental            
          anticipated to be received was consistent with the practice in              
          the rent-to-own industry.  In determining the weekly or monthly             
          rental rate, as the case may be, for each rental unit, the                  
          Entities divided such expected total gross rental by the total              
          number of weeks or months, as the case may be, under the initial            
          rental contract for such rental units.                                      
               Whenever a rental unit either was picked up by an Entity or            
          returned to that Entity prior to all payments being made under              
          the initial rental contract, due either to a failure of the                 
          customer to timely pay periodic rent or the exercise by the                 
          customer of the customer's rights to return the rental unit at              
          any time, normally a subsequent rental contract, having the same            
          provisions and weekly or monthly rental payment as the initial              
          rental contract, would be executed with another customer.4                  
          During the tax years in issue, each Entity periodically sold or             


               4The term of the subsequent rental contract would be                   
          adjusted, when so required, according to the Entity's internal              
          schedule.  This internal schedule might require a reduction in              
          the term of the lease depending upon the number of days the                 
          rental unit had been previously rented.  In a small minority of             
          circumstances, the weekly or monthly rental payments also would             
          be reduced under the subsequent rental contract on returned                 
          rental units which had sustained a diminished value beyond normal           
          wear and tear.  Normally this procedure would continue to be                
          followed until a customer retained the rental unit for the full             
          term of the rental contract.                                                

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Last modified: May 25, 2011