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a capital expenditure is one that secures an advantage
to the taxpayer which has a life of more than one year,
* * * and that the taxpayer must acquire something of
permanent use or value in his business * * * It is not
necessary that the taxpayer acquire ownership in a new
asset, but merely that he may reasonably anticipate a
gain that is more or less permanent. * * * [Fall
River Gas Appliance Co. v. Commissioner, 349 F.2d 515,
516-517 (1st Cir. 1965), affg. 42 T.C. 850 (1964);
citations omitted.]
In Fall River Gas Appliance Co. v. Commissioner, supra, the
taxpayer, a subsidiary of a seller and distributor of natural
gas, made expenditures consisting of installation costs for
leased gas appliances, primarily water heaters and conversion
burners for furnaces. Appliances were leased for 1 year
initially, and conversion burners were removable at the will of
the customer upon 24-hour notice. It was anticipated that the
overall duration of the leases would result in rental income upon
the appliances and greater consumption of gas which would benefit
the taxpayer. The court stated:
the taxpayer took a considered risk in the installation
of a facility upon the premises of another in
anticipation of an economic benefit flowing from the
existence of the facility over an indeterminable length
of time. * * * the totality of expenditure was made in
anticipation of a continuing economic benefit over a
period of years and such is indicative of a capital
expense. The record of gas sales and leased
installations, although certainly not compelling in
such regard, lends some strength to the conclusion that
anticipation has become fact. [Id. at 517; emphasis
added.]
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