35
activity, which included, among other things, securing potential
leases, reviewing the lessee's application, checking the lessee's
credit and trade references, and drafting lease documents. Id.
We held that such expenditures were capital expenditures, because
"they secure for the partnerships the right to receive benefits
under each lease that last well beyond the taxable year of the
expenditure." Id.
Costs associated with the origination of the loans
contribute to the generation of interest income and provide a
long-term benefit that the banks realize over the lives of the
underlying loans. The resulting stream of income extends well
beyond the year in which the costs were incurred. It was this
income benefit that was the primary purpose for incurring these
expenditures.23 While the useful life of a credit report and
other financial data may be of short duration, the useful life of
the asset they serve to create is not. Therefore, like the
appraisal costs in Woodward v. Commissioner, supra, and United
States v. Hilton Hotels Corp., supra, the construction-related
depreciation in Commissioner v. Idaho Power Co., supra, and the
lease acquisition costs in Strouth v. Commissioner, supra, the
23Petitioner argues that because the banks used the loan
application process as an opportunity to sell other services and
products, the costs associated with that function are not capital
expenses. Petitioner does not attempt to define which costs are
related to loan origination and which are related to other
selling costs. However, SFAS 91, par. 6 provides that the direct
loan origination costs consist only of those costs related to
activities "that would not have been incurred but for that loan."
(Emphasis added.) Therefore, by definition, the costs at issue
do not include additional selling expenses.
Page: Previous 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 NextLast modified: May 25, 2011