Lee D. and Marjorie L. Hustead - Page 10

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          that expense.  A. E. Staley Manufacturing Co. v. Commissioner,              
          supra at 195.                                                               
               Petitioners contend that their land development activities             
          did not change the physical characteristics of the land itself              
          nor did they affect title and that, therefore, there were no                
          "improvements or betterments" to the land.  Petitioners also                
          maintain that they did not have a vested interest in the zoning             
          change during the years at issue and would not acquire such an              
          interest until a land-use permit was granted; consequently, they            
          argue, their activities did not lead to a "permanent" change                
          during the years at issue, which, as petitioners interpret                  
          section 263(a)(1), is required for capitalization.                          
               While physical alterations, e.g., construction, or actions             
          affecting title, may be sufficient conditions to classify an                
          expense as capital, they are not necessary conditions.  INDOPCO,            
          Inc. v. Commissioner, supra at 86-87; Commissioner v. Lincoln               
          Savings & Loan Association, 403 U.S. 345, 358 (1971) ("� 263 does           
          not provide a complete list of nondeductible expenditures").  Nor           
          does section 263(a)(1) require that the change for which the                
          funds were expended be completed or vested within a specific tax            
          year for that change to be permanent within the meaning of that             
          section.                                                                    
               The foregoing principles have been applied in a number of              
          cases where expenditures in efforts to obtain changes in land               
          zoning have been required to be capitalized.  Godfrey v.                    




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