- 38 -
by banks since a credit card operation was merely a new method of
operating an old business. The Court of Appeals reasoned that,
since the taxpayer did not acquire a separate and distinct asset
from the expenditures, capitalization was not required.
In NCNB Corp. v. United States, supra, the Court of Appeals
for the Fourth Circuit held that costs incurred in developing
bank branches (such as expansion plans, feasibility studies, and
regulatory applications) were immediately deductible. The court
cited Commissioner v. Lincoln Sav. & Loan Association, supra, in
determining that the expenditures were currently deductible
because they did not create or enhance separate and identifiable
assets. NCNB Corp. v. United States, supra at 294. Although the
court recognized that a future benefit is a factor to be
considered, the language of the decision clearly emphasized the
lack of a separate and distinct additional asset in arriving at
its conclusion:
The money spent or obligated for metro studies,
feasibility studies, and applications to the
Comptroller of the Currency, it seems to us, adds
nothing to the value of a bank's assets which can be so
definitely ascertained that it must be capitalized.
Certainly no "separate and distinct additional asset"
is created. While the benefit of all of these classes
of expenses may or may not endure for more than one
year, that is but one factor to be considered. The
branch has no existence separate and apart from the
parent bank; as a branch bank, it is not readily
salable and has no market value other than the real
estate which it occupies and the tangible equipment
therein. [Id. at 293.]
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