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C. Towboat Engines and Petitioners’ Maintenance Procedures
Most of the towboats in petitioners’ fleet are equipped with
two turbocharged, “V-type,” two-cycle, diesel-powered engines.
During the years in issue, between two-thirds and three-quarters
of the towboats in petitioners’ fleet possessed similar engines
to the representative boats’ engines.3 The horsepower produced
by two engines ranges from 5,000 to 5,600 horsepower, depending
on the rotations per minute at which the engines are set to
operate. Assuming proper maintenance, towboat’s engines can
continue operating safely, efficiently and profitably as part of
a towboat’s main propulsion system for up to 40 years.
The procedures in controversy involve petitioners’ cleaning
and inspecting of engines to determine which of their parts are
within acceptable operating tolerances and can be reused and
which (if any) of these parts need to be reconditioned back to
acceptable operating tolerances or replaced with appropriate
replacements.4
3 For purposes of this case, the parties have agreed that
the Electro-motive Division (EMD) No. 16-645-E5 engine,
manufactured by General Motors, will be the representative
engine.
4 As part of the controversy over whether the expenditures
involved are currently deductible or must be capitalized,
respondent refers to these procedures as an “engine overhaul” and
petitioners refer to these procedures as “center-section engine
maintenance”.
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Last modified: May 25, 2011