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Petitioners purchase a towboat, including the engines, with the
expectation that its useful life is 40 years. To achieve the
expected useful life, petitioners regularly maintain the engines.
They replace a relatively limited number of parts on a regular
basis and inspect the vast majority of remaining parts, replacing
only those that are worn beyond a certain tolerance.
Petitioners also point out that two new engines would cost
$1.5 million plus installation of approximately $200,000. If
petitioners had replaced the two engines with overhauled or
rebuilt engines, the cost would have been about $800,000. By
comparison, the $100,000 maintenance is incidental when compared
to the cost of an overhauled or rebuilt engine. If respondent’s
perspective in this case were correct, the cost of a rebuilt
engine would be more similar in cost to the maintenance performed
by petitioners’ employees.
Accordingly, the procedures performed here are routine
maintenance that does not extend the expected 40-year life of the
boat or engine. The procedures constituted preventative
maintenance that permitted the engine to operate as intended by
the manufacturer and the owner. Although it could be said that
such procedures extended the life of the engine (in the sense
that failure to perform them would have resulted in engine
default) the life of the engine was not appreciably prolonged by
these procedures. Considered in a vacuum, a $100,000 cost for
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