23
The Supreme Court in INDOPCO, Inc. v. Commissioner, supra at
83-84, stated:
The primary effect of characterizing a payment as
either a business expense or a capital expenditure
concerns the timing of the taxpayer's cost recovery:
While business expenses are currently deductible, a
capital expenditure usually is amortized and
depreciated over the life of the relevant asset, or,
where no specific asset or useful life can be
ascertained, is deducted upon dissolution of the
enterprise. * * * Through provisions such as these,
the Code endeavors to match expenses with the revenues
of the taxable period to which they are properly
attributable, thereby resulting in a more accurate
calculation of net income for tax purposes. * * *
Income tax deductions are a matter of legislative grace and
the burden of clearly showing the right to the claimed deduction
is on the taxpayer. INDOPCO, Inc. v. Commissioner, supra at 84.
Moreover, deductions are strictly construed and allowed only "'as
there is clear provision therefor.'" Id. (quoting New Colonial
Ice Co. v. Helvering, 292 U.S. 435, 440 (1934)).
In light of these general principles, we now turn to the
facts of these cases. All the costs at issue were incurred by
13(...continued)
1992-1 C.B. 155, 165. The relevant changes were effective Apr.
10, 1992, and provide:
under section 263 or 263A, a liability that relates to
the creation of an asset having a useful life extending
substantially beyond the close of the taxable year is
taken into account in the taxable year incurred through
capitalization * * * and may later affect the
computation of taxable income through depreciation or
otherwise over a period including subsequent taxable
years, in accordance with applicable Code sections and
guidance published by the Secretary. * * *
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