SECTION 3. SCOPE

This revenue procedure applies to a taxpayer that —

(1) repairs customer-owned (or customer-leased) equipment under warranty or maintenance agreements that are provided to the customer for either no charge or a predetermined fee that does not change during the term of the agreement (regardless of the taxpayer’s costs to comply with the agreement);

(2) is obligated under the warranty or maintenance agreements to repair the customer’s equipment (including all parts and labor related to the repair) for either no charge or a nominal service fee that is unrelated to the actual cost of parts and labor provided;

(3) maintains a pool or pools of spare parts that are used primarily in the taxpayer’s maintenance operation of repairing customer-owned (or customer-leased) equipment under warranty or maintenance

agreements, exchanges the spare parts for defective parts in the customer-owned (or customer-leased) equipment, and generally repairs and reuses the defective parts in its pool of spare parts (the “rotable spare parts”); and

(4) has a depreciable interest in the rotable spare parts and has placed in service the rotable spare parts after 1986.