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The costs at issue consist of expenditures to develop the
concept for each of the 82 new RIC's, to develop the initial
marketing plan, to draft the management contract, to form the
RIC's, to obtain the board of trustees' approval of the contract,
and to register the new RIC with the SEC and the various States
in which the RIC would be marketed. These expenditures secured
for petitioner the right to market the particular investment
concept of each RIC. Without the approval of the board of
trustees, the resulting contract with the RIC, and the necessary
filings with the SEC and the individual States, petitioner could
not offer shares of the investment vehicle to its investors.
Thus, by incurring the costs at issue, petitioner secured a
significant long-term benefit.
The expenditures in issue are also similar to organization
costs, which are generally considered capital expenditures.
Typically, expenditures incurred in connection with organizing,
recapitalizing, or merging a business are not currently
deductible. See INDOPCO, Inc. v. Commissioner, 503 U.S. at 89-
90; E.I. du Pont de Nemours & Co. v. United States, 432 F.2d
1052, 1058 (3d Cir. 1970); Skaggs Cos. v. Commissioner, 59 T.C.
201, 206 (1972).
In launching a new RIC, petitioner prepares memoranda for
the board of trustees, prepares a prospectus and other
applications for the SEC and State approvals, registers each RIC,
and prepares the governing contract. Petitioner then acquires an
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