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In INDOPCO, Inc. v. Commissioner, supra at 87, the Supreme
Court rejected the argument that the creation or enhancement of a
separate and distinct asset is a prerequisite to capitalization,
explaining that "the creation of a separate and distinct asset
well may be a sufficient, but not a necessary, condition to
classification as a capital expenditure." The Supreme Court
emphasized the importance of the realization of a significant
future benefit in determining whether an expense should be
capitalized, stating:
Although the mere presence of an incidental future
benefit--"some future aspect"--may not warrant
capitalization, a taxpayer's realization of benefits
beyond the year in which the expenditure is incurred is
undeniably important in determining whether the
appropriate tax treatment is immediate deduction or
capitalization. See United States v. Mississippi
Chemical Corp., 405 U.S. 298, 310 (1972) (expense that
"is of value in more than one taxable year" is a
nondeductible capital expenditure); Central Texas
Savings & Loan Assn. v. United States, 731 F.2d 1181,
1183 (CA5 1984) ("While the period of the benefits may
not be controlling in all cases, it nonetheless remains
a prominent, if not predominant, characteristic of a
capital item"). Indeed, the text of the Code's
capitalization provision, � 263(a)(1), which refers to
"permanent improvements or betterments," itself
envisions an inquiry into the duration and extent of
the benefits realized by the taxpayer. [INDOPCO, Inc.
v. Commissioner, 503 U.S. at 87-88.]
The Supreme Court went on to uphold the lower courts' rulings
that capitalization was required because the expenditures in
question provided the taxpayer with significant future benefits.
INDOPCO, Inc. v. Commissioner, supra at 87-89. Therefore, an
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