U.S. Bancorp v. Commissioner
United States Tax Court
P, a bank holding company, leased a mainframe computer from ICC, a finance corporation, for a 5-year term. Less than 1 year later, P decided that the computer was no longer adequate for its needs. P thereupon entered into a "rollover agreement" with ICC, whereby the lease was terminated upon the condition, among other things, that P commit to finance the replacement equipment with ICC.
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P, a bank holding company, leased a mainframe computer from ICC, a finance corporation, for a 5-year term. Less than 1 year later, P decided that the computer was no longer adequate for its needs. P thereupon entered into a "rollover agreement" with ICC, whereby the lease was terminated upon the condition, among other things, that P commit to finance the replacement equipment with ICC. The rollover agreement provided for a $ 2.5 million rollover charge to be paid by P. Shortly thereafter, pursuant to the rollover agreement, P leased a more powerful mainframe computer from ICC for a 5-year…
1Opinion of the Court
OPINION
Beghe, Judge:
This matter is before the Court on the parties’ motions for partial summary judgment filed under Rule 121.2 Petitioner’s principal office was located in Portland, Oregon, when it filed the petition.
The sole issue for decision is whether the charge incurred by a lessee in terminating a lease of a mainframe computer and simultaneously initiating a new lease of a more powerful mainframe computer with the same lessor is deductible in the year incurred or must be capitalized and amortized over the 5-year term of the new lease. We hold that the charge must be capitalized and…
2Cases cited23 opinions
- Welch v. HelveringSupreme Court of the United States · 1933
- Deputy, Administratrix v. Du PontSupreme Court of the United States · 1940
- Indopco, Inc. v. CommissionerSupreme Court of the United States · 1992
- Sundstrand Corporation v. Commissioner of Internal RevenueCourt of Appeals for the Seventh Circuit · 1994
- Sundstrand Corp. v. CommissionerUnited States Tax Court · 1992
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3Cited by8 opinions
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- Estate of Harper v. CommissionerUnited States Tax Court · 2000
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- Metrocorp, Inc. v. CommissionerUnited States Tax Court · 2001
- Metrocorp, Inc. v. CommissionerUnited States Tax Court · 2001
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