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We have found that petitioner contemplated and received
significant, long-term benefits as a result of the expenditures
it incurred in the creation of 82 RIC's during the years in
issue. The future benefits derived from these RIC's were not
merely incidental. Accordingly, we hold that these expenditures
do not qualify for deduction as "ordinary and necessary" business
expenses under section 162(a).
Amortization
Having concluded that the amounts expended by petitioner
were in the nature of capital expenditures, we must decide
whether petitioner is entitled to a deduction for the
amortization of such costs. Section 167(a) allows taxpayers to
take a depreciation deduction for property used in a trade or
business. Section 167 is not limited in its application to
tangible property, but is also applicable to intangibles.
Section 1.167(a)-(3), Income Tax Reg., provides:
If an intangible asset is known from experience or
other factors to be of use in the business or in the
production of income for only a limited period, the
20(...continued)
the contrary, it explicitly limits its application
solely to those investigatory costs which are
deductible in nature. The implication is inescapable
that there are other investigatory costs which are not
deductible, i.e. are to be capitalized. Consequently,
we are brought straight back to the question we started
with: In the case of each expenditure, was it
deductible, or capitalizable? * * *
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