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Respondent asserts that the replacement clause in
petitioner’s Service Rental Agreement is evidence that petitioner
estimated the average useful life to be 50 months. The
replacement provision in the Service Rental Agreement is not
determinative of the useful life of the garments and dust control
items. We are persuaded that the provision was used by
petitioner as an incentive for customers to care for the garments
and to prevent customers from misusing the garments and dust
control items. Normal wear and tear, however, would reduce the
useful life of the garments.
When respondent computed the deficiency amounts, respondent
based the useful life of the garments and dust control items on
the length of the service contract, which was 3 years for
industrial garments and 5 years for clean room garments. The
length of the term of the service contract is not a good
indication of the useful life of the garments and dust control
items, because the contract had a provision for the replacement
of items and the length of the agreement could be changed in
negotiations. See Ames v. Commissioner, supra (the useful life
of leasehold improvements was the estimated life without regard
to the length of the lease term).
We conclude that petitioner has shown that its approximation
of the useful life of the garments and dust control items was
reasonable and was based on a reasonable relationship to its
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