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disallowed and the amortization amounts allowed by respondent for
UFSB as well as the increased income determined by respondent as
a result of these adjustments:
Net Loan Amortization Increased
Year Origination Cost1 Amount Income
1990 $30,094 ($5,016) $25,078
1991 60,225 (20,069) 40,156
1992 108,410 (48,175) 60,235
1993 101,955 (78,220) 23,735
1This is the excess of deferred loan origination costs over
deferred fees.
OPINION
The sole issue for decision is whether certain expenditures
incurred in connection with the origination of loans are
deductible as ordinary and necessary business expenses under
section 162. Respondent determined that they are not deductible
because section 263 requires that they be capitalized.
To qualify as an allowable deduction under section 162(a),
an item must (1) be paid or incurred during the taxable year; (2)
be for carrying on any trade or business; (3) be an expense; (4)
be a necessary expense; and (5) be an ordinary expense.
Commissioner v. Lincoln Sav. & Loan Association, 403 U.S. 345,
352 (1971). Respondent argues that the expenses in question were
not ordinary and, therefore, not currently deductible.
In one sense, the term "ordinary" in section 162 prevents
the deduction of expenses that are not normally incurred in the
type of business in which the taxpayer is engaged ("ordinary" in
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