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Reg. 5702 (Feb. 25, 1988). For this purpose, extraordinary
personal services are provided only if performed by individuals
and the customers’ use of the property is incidental to their
receipt of the services. See sec. 1.469-1T(e)(3)(v), Temporary
Income Tax Regs., 53 Fed. Reg. 5702 (Feb. 25, 1988).
The lease agreement had an indefinite term and extended over
a number of years. Petitioners’ equipment was maintained in the
equipment yard of Hairston and was available for use and sublease
by Hairston at all times throughout each year. Under section
1.469-1(e)(3)(iii)(A) and (D), Income Tax Regs., Hairston’s right
to use petitioners’ equipment is properly treated as one period
of customer use extending for the entirety of each taxable year.
Petitioners contend that they had an agency, not a lease,
relationship with Hairston and that they individually should be
regarded as the lessors of their equipment to end users for
average periods of customer use of less than 30 days.
Petitioners’ contention is contrary to the evidence and is
rejected. In light of the form of the lease agreement and the
course of conduct between petitioners and Hairston, under
Oklahoma law, the arrangement with regard to petitioners’
equipment constituted a lease from petitioners to Hairston (i.e.,
a transfer of the right of possession and use of property for a
term in return for consideration). See Okla. Stat. tit. 12A,
sec. 2A-103(j) and (k) (1991).
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