As part of a warranty program provided by the manufacturer of graders, the taxpayer, which was a distributor, was required to inspect graters sold by it under the program twice per year for five years. Amounts paid by the manufacturer to the taxpayer only covered part of the cost of this inspection program.
The portion of the proceeds received on sale of the graders that the taxpayer estimated was equal to the future additional cost to it of the inspection program was eligible for the reserve under s. 20(1)(m).