PNC Bancorp, Inc. Successor to First National Pennsylvania Corporation, et al. - Page 34

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          incurred in acquiring an asset are capital expenditures); United            
          States v. Hilton Hotels Corp., 397 U.S. 580 (1970) (fees paid to            
          a consulting firm and the cost of legal and other professional              
          services incurred in connection with appraisal proceeding to                
          value shares of dissenting shareholders in merged corporation               
          were capital expenditures).                                                 
               Credit reports, appraisals, and similar information about              
          prospective borrowers are critical in deciding whether to make a            
          loan.  It is the basis on which banks make their credit risk                
          management decisions.  While the specific information available             
          when a loan is made may become outdated in a relatively short               
          period of time, the quality of the decision to make a loan (and             
          thereby acquire an asset) is predicated on such information.  The           
          soundness of the decision to make a loan is assimilated into the            
          quality and value of the loan.  Thus, the direct costs of the               
          decision-making process should be assimilated into the asset that           
          was acquired.  See Commissioner v. Idaho Power Co., 418 U.S. at             
          14 (held that construction-related depreciation cannot be                   
          currently deducted "rather, the investment in the equipment is              
          assimilated into the cost of the capital asset constructed.")               
               In Strouth v. Commissioner, T.C. Memo. 1987-552, the                   
          taxpayers were partners in several partnerships engaged in the              
          business of purchasing and leasing office equipment to local                
          companies and professional offices.  Generally, the terms of                
          these leases ranged from 3 to 5 years.  The partnerships paid a             
          corporation to perform services associated with the leasing                 



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