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appropriate inquiry in deciding issues of capitalization is "the
duration and extent of any benefits that * * * [the taxpayer]
received * * * [from its expenditures]". Connecticut Mut. Life
Ins. Co. & Consol. Subs. v. Commissioner, 106 T.C. 445, 453
(1996).
Petitioner's RIC's were primarily organized as separate
series within Massachusetts business trusts.10 A Massachusetts
business trust, like any corporation organized under State law,
has perpetual existence. Also, the series of a trust all have
perpetual existence. Each RIC has a separate management contract
with petitioner that must be separately approved by the trustees
and the shareholders of each RIC. No RIC managed by petitioner
has ever exercised its right of termination or otherwise failed
to renew a management contract with petitioner. As a general
matter, a mutual fund board of trustees will terminate or fail to
renew a management contract only in rare circumstances involving
fraud or continued mismanagement.
As the RIC's founder, petitioner expects to be awarded the
initial contract to manage the new fund, as well as the annual
renewals of that contract for as long as the RIC exists. Here,
petitioner's expectation was in fact realized. The contract
between petitioner and the new RIC generally provides fund
management services in exchange for remuneration. Both
10Two of the RIC's created during the years in issue
involved the creation of new Massachusetts business trusts.
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