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consolidated corporate income tax returns for the years under
consideration (1987 through 1989). Petitioner reports its income on
a calendar-year basis, employing the accrual method of accounting.
Petitioner timely filed its U.S. Corporation Income Tax Returns for
1987, 1988, and 1989.
Issue I. Removal of Asbestos-Containing Materials
The first issue is whether petitioner is entitled to deduct
the costs of removing asbestos-containing materials from its
Douglas Street bank building. Petitioner argues that the
expenditures constitute section 162(a) ordinary and necessary
expenses. Respondent, on the other hand, contends that the
expenditures must be capitalized pursuant to section 263(a)(1).
Alternatively, respondent contends that the expenditures must be
capitalized pursuant to the "general plan of rehabilitation"
doctrine.
A. The Douglas Street Building
One of petitioner's subsidiaries, Norwest Bank Nebraska, N.A.
(Norwest Nebraska), owns a building at 1919 Douglas Street in
Omaha, Nebraska (the Douglas Street building or building). The
Douglas Street building is a three-story commercial office building
that occupies half a square block and has a lower level parking
garage. Norwest Nebraska constructed the building in 1969 at a
$4,883,232 cost. During all relevant periods, Norwest Nebraska
used the Douglas Street building as an operations center as well as
a branch for serving customers.
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