- 36 -
produce returns for many years in the future" and, therefore, are
not deductible. Id. at 1059.
Petitioner acknowledges that the expenditures it incurred in
launching the new RIC's may result in the future benefit of
preserving, promoting, and expanding its investment management
business. However, petitioner contends that this type of future
benefit has never been held to require capitalization.
Notwithstanding INDOPCO, Inc. v. Commissioner, supra, petitioner
argues that there are numerous court decisions which support the
principle that the costs of expanding or preserving an existing
business are deductible expenses rather than capital
expenditures. E.g., NCNB Corp. v. United States, 684 F.2d 285
(4th Cir. 1982); Colorado Springs Natl. Bank v. United States,
505 F.2d 1185 (10th Cir. 1974); Briarcliff Candy Corp. v.
Commissioner, 475 F.2d 775 (2d Cir. 1973), revg. T.C. Memo. 1972-
43; Equitable Life Ins. Co. v. Commissioner, T.C. Memo. 1977-299.
In Briarcliff Candy Corp. v. Commissioner, T.C. Memo. 1972-
43, the taxpayer, an urban candy manufacturer, incurred certain
expenses to maintain its dwindling market share by forming a
separate franchise division within the company to obtain display
contracts with drugstores in suburban locations. We held that
the expenditures incurred in obtaining these contracts were
capital expenditures, stating:
Regardless of whether amounts expended by petitioner
are designated as promotional expenses, advertising
Page: Previous 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 NextLast modified: May 25, 2011