- 19 -
and dowels) normally are installed in the engine during the
rebuilding process. The power packs are completely rebuilt with
a large number of new parts during the rebuilding process. The
oil pumps, water pumps, engine turbochargers, and governors are
normally removed and exchanged for rebuilt parts during the
rebuilding process. The accessory drive gears, all of the piping
on the front and aft ends of the engine, the governor drive gear,
and the turbocharger drive gears are removed and normally
exchanged for rebuilt parts during the rebuilding process.
Normally, a rebuilder of EMD engines warrants its labor for 1
year. Rebuilt parts normally carry a 6-month warranty, and new
EMD parts used in the rebuilding process carry a 1-year warranty.
During the years in issue, petitioners did not repower any of
their towboats.
E. Petitioners’ Accounting Practices
Petitioners use an accrual method of accounting for
reporting their income, expenses, and results of operations for
both financial and tax reporting purposes. For Federal income
tax purposes, petitioners depreciate each of their towboats as a
single asset under the modified accelerated cost recovery system
using the prescribed recovery period of 10 years under the
composite 18-year class life. For financial reporting purposes,
petitioners depreciate a new or used towboat as a single asset
over 35 years. The useful life of a properly maintained towboat
Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NextLast modified: May 25, 2011