FMR Corp. and Subsidiaries - Page 44

                                       - 44 -                                         
          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.]                             




Page:  Previous  30  31  32  33  34  35  36  37  38  39  40  41  42  43  44  45  46  47  48  49  Next

Last modified: May 25, 2011