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costs" contained in the House report accompanying section 195,19
the Court of Appeals for the Fourth Circuit determined:
Congress is thus under the impression that expenditures
for market studies and feasibility studies, as at issue
here, are fully deductible if incurred by an existing
business undergoing expansion. An interpretation by us
to the contrary would render � 195 meaningless for it
would obliterate the reference point in the statute--
"the expansion of an existing trade or business."
[NCNB Corp. v. United States, supra at 291.]
Although, the court found that the investigatory expenditures in
question in that case did not require capitalization, we find
that neither that holding, nor the statutory language of section
195, requires that every expenditure incurred in any business
expansion is to be currently deductible.
Under petitioner's reasoning, any expenditure incurred in
the expansion of an existing business would be deductible.
Obviously this is not a proper interpretation of the law.
Section 195 allows taxpayers to amortize "startup" expenses only
when such expenses, "if paid or incurred in connection with the
19As an example of expenditures, which would be allowable
deductions for an existing business, the House report that
accompanied sec. 195 explained:
Under the provision, eligible expenses consist of
investigatory costs incurred in reviewing a prospective
business prior to reaching a final decision to acquire
or to enter that business. These costs include
expenses incurred for the analysis or survey of
potential markets, products, labor supply,
transportation facilities, etc. * * * [H. Rept. 96-
1278, at 10 (1980), 1980-2 C.B. 709, 712.]
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