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expenses or selling expenses, it is apparent that
petitioner obtained contracts which provided a channel
of marketing distribution which would be a benefit to
petitioner in future years. The benefits derived from
contracts with the drugstore outlets were not merely
incidental to income in future years but were
instrumental in the production of such income.
* * * [Id.]
The Court of Appeals for the Second Circuit reversed, finding
that the franchising costs did not enhance or create a "separate
and distinct additional asset." The court held that the costs
were incurred in an effort by the taxpayer to maintain its
current business profits and customers and were therefore
currently deductible. Briarcliff Candy Corp. v. Commissioner,
475 F.2d at 786-787. The Court of Appeals' reliance on a
"separate and distinct asset" test was based upon its reading of
Commissioner v. Lincoln Sav. & Loan Association, 403 U.S. 345
(1971), which the Court of Appeals stated had "brought about a
radical shift in emphasis" that required expenditures to be
capitalized only where the expenditures created or enhanced a
separate and distinct asset. Briarcliff Candy Corp. v.
Commissioner, 475 F.2d at 782. In reaching its conclusion that
the expenses were deductible, the Court of Appeals disregarded
the resulting future benefits obtained by the taxpayer.
The Court of Appeals for the Tenth Circuit in Colorado
Springs Natl. Bank v. United States, supra, expanded on
Briarcliff Candy Corp. v. Commissioner, supra, in holding that
the costs of establishing credit card operations were deductible
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