33
similar financial data lasts only a short period of time.21 We
do not find this evidence determinative of the issue before us.22
A bank obtains loan applications, credit reports and similar
data to evaluate a potential borrower's financial condition for
purposes of determining whether to make a loan. When funds are
disbursed and a loan is created, the loan becomes a separate and
distinct bank asset. Under the reasoning of Commissioner v.
Lincoln Sav. & Loan Association, 403 U.S. at 354, costs that
serve to create a loan, such as costs of credit reports and
financial evaluations, are costs that must be capitalized and
amortized over the useful lives of those loans. "The requirement
that costs be capitalized extends beyond the price payable to the
seller to include any costs incurred by the buyer in connection
with the purchase, such as appraisals of the property or the
costs of meeting any conditions of the sale." Ellis Banking
Corp. v. Commissioner, 688 F.2d 1376, 1379 (11th Cir. 1982); see
also Woodward v. Commissioner, 397 U.S. 572 (1970) (ancillary
expenses, such as legal, accounting, and appraisal costs,
21We note that some of the expenditures in issue were
incurred in connection with the preparation and recording of
notes and security interests. The rights created and secured by
these expenditures clearly remain in effect for the life of the
loan. The record does not contain a breakdown showing the
amounts of the various types of expenditures.
22Although the short useful life of credit information was a
factor considered by the court in Iowa-Des Moines Natl. Bank v.
Commissioner, 592 F.2d 433 (8th Cir. 1979), affg. 68 T.C. 872
(1977), we found that the expenditures at issue in that case did
not create or enhance a separate and distinct asset or property
interest. Therefore, Iowa-Des Moines Natl. Bank v. Commissioner,
supra, is distinguishable.
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