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an expenditure as capital in nature. Another consideration in
making such a determination is whether the expenditure provides
the taxpayer with long-term benefits. Id. at 87.
Respondent contends that the expenditures petitioner
incurred to launch the 82 new RIC's must be treated as capital
expenditures. Respondent argues that the costs resulted in the
acquisition of separate and distinct assets for petitioner.
Respondent also argues that the costs in issue resulted in a
significant future benefit for petitioner.
Separate and Distinct Assets
Both parties agree that if the costs of launching the 82
RIC's served to create separate and distinct assets, they must be
capitalized and cannot be deducted under section 162(a).
Petitioner argues that the expenditures at issue do not produce
separate and distinct assets because, among other things, the
management contracts with the RIC's are not transferable and no
exclusive rights are obtained in the launching process.
Petitioner points out that at the time a management contract is
entered into, the RIC is an empty shell with no shareholders and
no assets and that petitioner will earn revenue from the RIC only
if investors make the choice to invest in the RIC after the
management contract is entered into. Petitioner contends that a
new RIC, and petitioner's management contract with a newly formed
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