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purchased rental units to or from the other Entity at the selling
Entity's book value.5
Rental units ceased to be in an Entity's depreciable rental
inventory upon the occurrence of the following events: (1)
Customers' retaining rental units for the full term of the rental
contract; (2) customers' electing the early purchase option
thereunder; (3) selling or junking substantially damaged rental
units which were returned to an Entity by customers; (4) theft of
the rental units; and (5) transfers between one Entity and the
other Entity. The vast majority of rental units ceased to be in
an Entity's inventory due to customers' retaining the rental
units for the full term of the rental contract (be it the initial
rental contract or the subsequent rental contract). If a
customer retained the rental unit for the full term of the rental
contract, title to the rental unit vested in the customer at no
additional cost, provided the customer had paid all periodic
rental payments. When any of the units ceased to be in an
Entity's depreciable rental inventory, the remaining basis was
either "charged off" or used to determine gain or loss from the
disposition.
5The Entities used the straight line method of depreciation
for book purposes with an 18-month useful life to depreciate all
of the rental units. Such transfers between Entities were not
made for tax reasons, but for the purpose of transferring rental
units to maximize their income potential. The term of the rental
contract of the rental units so purchased, which had been
previously rented by the selling Entity, was adjusted
accordingly.
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Last modified: May 25, 2011