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is not a capital expenditure under section 263. Commissioner v.
Tellier, 383 U.S. 687, 689 (1966); Deputy v. Du Pont, supra at
495; Welch v. Helvering, 290 U.S. 111, 113 (1933). If a cost is
a capital expenditure, the capitalization rules of section 263
take precedence over the deduction rules of section 162, sec.
161; Commissioner v. Idaho Power Co., 418 U.S. 1, 17 (1974),
thereby preventing capital expenditures from being deducted
currently under section 162.
In determining whether a cost is a capital expenditure, the
Supreme Court in INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84
(1992), noted that deductions are exceptions to the norm of
capitalization. The Court stated that deductions are
specifically enumerated and thus are subject to disallowance in
favor of capitalization. Capital expenditures, by contrast, are
not exhaustively enumerated; rather than providing a complete
list of nondeductible expenditures, section 263 serves as a
general means of distinguishing capital expenditures from current
expenses.
The creation of a separate and distinct asset, while
sufficient to classify an expenditure as capital in nature,
Commissioner v. Lincoln Sav. & Loan Association, 403 U.S. 345,
354 (1971), is not necessary to capital classification. The
Supreme Court stated in INDOPCO that a taxpayer's realization of
benefits beyond the year in which the expenditure is incurred is
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