28
capitalized in another context. For example, in Commissioner v.
Idaho Power Co., 418 U.S. 1, 13 (1974), the Supreme Court noted
the following regarding wages paid by a taxpayer in its trade or
business:
Of course, reasonable wages paid in the carrying on of
a trade or business qualify as a deduction from gross
income. * * * But when wages are paid in connection
with the construction or acquisition of a capital
asset, they must be capitalized and are then entitled
to be amortized over the life of the capital asset so
acquired.[17]
Simply because other cases have allowed a current deduction for
similar expenses in different contexts does not require the same
result here. Expenditures, which otherwise might qualify as
currently deductible must be capitalized if they are incurred in
the acquisition of a separate and distinct asset regardless of
their recurring nature. "[A]n expenditure that would ordinarily
be a deductible expense must nonetheless be capitalized if it is
incurred in connection with the acquisition of a capital asset."
Ellis Banking Corp. v. Commissioner, 688 F.2d at 1379.
In Commissioner v. Idaho Power Co., supra at 16, the Supreme
Court considered the interrelationship between Part VI (which
includes section 161 and following, relating to items deductible)
17"It is clear that an expenditure need not be for a capital
asset, as described in Section 1221 * * * in order to be
classified as a capital expenditure." Georator Corp. v. United
States, 485 F.2d 283, 285 (4th Cir. 1973); see also NCNB Corp. v.
United States, 684 F.2d 285, 290 n.7 (4th Cir. 1982) (recognizing
that, although sec. 1221 defines capital asset, "it does so for
the purpose of determining capital gains and losses and not for
determining what expenditures are capital.").
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