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its products, and, in this setting, the subsidies relate
primarily to the income from that sale as opposed to income that
is intended to be generated in the future. People's may deduct
the subsidies as an ordinary expense of its business.
As to the remaining expenditures, those amounts are
promotional or selling expenses unrelated to a specific sale.
Given our finding that these expenditures primarily helped
People's increase its customer base, we now decide whether
gaining new customers yielded a future benefit to People's that
was more than incidental. We conclude it did. While People's
made substantial investments to induce its customers to use
natural gas, its customers also made substantial investments to
become gas customers. That is the point of many of the FEECA
programs. New gas customers must generally buy new appliances.
Often they have to install gas piping within the walls of their
homes or commercial structures. As a result, both People's and
its new customers have a strong incentive to continue their
business relationships beyond the initial years. These upfront
costs tend to discourage People's new customers from switching to
other energy sources and essentially assure People's that it will
receive revenue from these customers in the future. This
projected revenue stream, which is the direct object of People's
promotional expenditures, is a significant future benefit. The
expenditures connected thereto must be capitalized. See Houston
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