- 45 -
operation of an existing active trade or business * * * would be
allowable as a deduction for the taxable year in which paid or
incurred." Sec. 195(c)(1)(B). Section 195 did not create a new
class of deductible expenditures for existing businesses.
Rather, in order to qualify under section 195(c)(1)(B), an
expenditure must be one that would have been allowable as a
deduction by an existing trade or business when it was paid or
incurred. See Duecaster v. Commissioner, T.C. Memo. 1990-518
("Nothing in the statute or the legislative history suggests that
section 195 was intended to create a deduction, by way of
amortization, in respect of an item which would not, in any
event, have been deductible under prior law.").20
20As Judge Murnaghan, who wrote the panel opinion in NCNB
Corp. v. United States, supra at 295, stated in his dissent to
the en banc majority opinion:
It requires a giant, and unjustified leap, to
derive from the justification set out in the
legislative history any support for the proposition
that all investigatory costs are automatically
deductible, irrespective of length of life. Eligible
expenses under IRC � 195 include "investigatory costs
incurred in reviewing a prospective business prior to
reaching a final decision to acquire or to enter that
business." S. Rep. No. 1036, supra, at 7301. But that
is only one of the qualifications. In addition, to
qualify as an eligible expense, an expenditure "must be
one which would be allowable as a deduction for the
taxable year in which it is paid or incurred if it were
paid or incurred in connection with the expansion of an
existing trade or business." Id.
Thus, the legislative history does not purport to
say that all investigatory costs are deductible. To
(continued...)
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