The other property may be charged for as a part of, or in addition to, the sales price of the actual real or tangible personal property. If the value of the other property is not greater than 20 percent of the total sales price, including the value of all related services other than financing services, the sale of the other property is related to the sale of actual real or tangible personal property.
Delivery, financing installation. maintenance, repair, or instructional services generally qualify as related services. The services may be charged for as a part of, or in addition to, the sales price of the property. Where the value of all services other than financing services is not greater than 20 percent of the total of the sales price of the property, including the value of all the services other than financing services, all of the services are considered to be incidental to the sale of the property. Where the value of the services is greater than 20 percent, the determination as to whether a service is a related service in a particular case is to be made on the basis of all relevant facts and circumstances.
where-
OB = the opening balance at the beginning of the first taxable year
CG = the amount of these obligations at the close of the last preceding taxable year
SG = the sum of the amounts of these obligations at the close of the five preceding taxable years
SNL the sum of the amounts of net losses arising from these obligations for the five preceding taxable years
Example. For 1977, A, a dealer in automobiles who uses the calendar year as the taxable year, adopts in accordance with this section the reserve method of treating section 166(f)(1)(A) guaranteed debt obligations. A's first year in business as an automobile dealer is 1973. For 1972, 1973, 1974, 1975, and 1976, A's records disclose the following information with respect to these obligations:
Year | Obligations outstanding at close of year | Gross losses from these obligations | Recoveries from these obligations | Net losses from these obligations |
1972 | $0 | $0 | $0 | $0 |
1973 | 780,000 | 9,700 | 1,000 | 8,700 |
1974 | 795,000 | 8,900 | 1,050 | 7,850 |
1975 | 850,000 | 8,850 | 850 | 8,000 |
1976 | 820,000 | 8,300 | 1,400 | 7,900 |
Total | 3,245,000 | 36,750 | 4,300 | 32,450 |
The opening balance for 1977 of A's reserve for these obligations is $8,200, determined as follows:
Example. In 1977, A, an individual who operates an appliance store and uses the calendar year as the taxable year, adopts the reserve method of treating section 166(f)(1)(A) guaranteed debt obligations. The initial balance of A's suspense account is $8,200. At the close of 1977, 1978, 1979, and 1980, the balance of A's reserve for these obligations is $8,400, $8,250, $8,150, and $8,175, respectively, after making the addition to the reserve for each year. The adjustments under section 166(f)(4)(B) to the suspense account at the close of each of the years involved are as follows:
(1) Taxable year | 1977 | 1978 | 1979 | 1980 |
(2) Closing reserve account balance | $8,400 | $8,250 | $8,150 | $8,175 |
(3) Opening suspense account balance | 8,200 | 8,200 | 8,200 | 8,150 |
(4) Line (2) less line (3) | 200 | 50 | (50 | 25 |
(5) Adjustment to suspense account balance | 0 | 0 | (50 | 25 |
(6) Closing suspense account balance (line 3 plus line 5) | 8,200 | 8,200 | 8,150 | 8,175 |
26 C.F.R. §1.166-10