29
and Part IX (which includes section 261 and following, relating
to items not deductible) of the Internal Revenue Code. The Court
held that the priority-ordering directives of sections 161 and
261 require that the capitalization provision of section 263(a)
take precedence over section 162(a). Commissioner v. Idaho Power
Co., supra at 17. Section 161 provides that "In computing
taxable income under section 63, there shall be allowed as
deductions the items specified in this part, subject to the
exceptions provided in part IX". As the Supreme Court explained:
The clear import of � 161 is that, with stated
exceptions set forth either in � 263 itself or provided
for elsewhere (as, for example, in � 404 relating to
pension contributions), none of which is applicable
here, an expenditure incurred in acquiring capital
assets must be capitalized even when the expenditure
otherwise might be deemed deductible under Part VI.
[Commissioner v. Idaho Power Co., supra at 17; emphasis
added.]
And, as the Supreme Court more recently observed:
The notion that deductions are exceptions to the norm
of capitalization finds support in various aspects of
the Code. Deductions are specifically enumerated and
thus are subject to disallowance in favor of
capitalization. See �� 161 and 261. Nondeductible
capital expenditures, by contrast, are not exhaustively
enumerated in the Code; rather than providing a
"complete list of nondeductible expenditures," Lincoln
Savings, 403 U.S., at 358, * * * � 263 serves as a
general means of distinguishing capital expenditures
from current expenses. See Commissioner v. Idaho Power
Co., 418 U.S., at 16. * * * For these reasons,
deductions are strictly construed and allowed only "as
there is a clear provision therefor." [INDOPCO, Inc.
v. Commissioner, 503 U.S. at 84.]
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