RJR Nabisco Inc. (Formerly R.J. Reynolds Industries, Inc.) and Consolidated Subsidiaries - Page 34

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          Section 1.162-1(a), Income Tax Regs.  The regulations do not                
          further describe the nature of those advertising and selling                
          expenses (hereafter, without distinction, advertising expenses)             
          that are deductible business expenses, although section 1.162-              
          20(a)(2), Income Tax Regs., provides that expenditures for                  
          institutional or “goodwill” advertising that keeps the taxpayer’s           
          name before the public are generally deductible business expenses           
          “provided the expenditures are related to the patronage the                 
          taxpayer might reasonably expect in the future.”  The                       
          regulations, thus, suggest that expenditures for ordinary                   
          business advertising are not subject to the usual inquiry when it           
          comes to the question of the proper time to give tax effect to              
          such an expenditure.                                                        
               Sections 1.162-1(a) and 20(a)(2), Income Tax Regs., however            
          predates INDOPCO, Inc. v. Commissioner, supra at 87, in which the           
          Supreme Court concluded that significant future benefits were               
          “undeniably important” in making the capitalization inquiry.  See           
          also FMR Corp. & Subs. v. Commissioner, 110 T.C. ___ (1998) (slip           
          op. at 39).  Subsequently, the Commissioner ruled that INDOPCO,             
          Inc. does not affect the treatment of advertising expenditures              
          under section 162(a).  In pertinent part, Rev. Rul. 92-80, 1992-2           
          C.B. 57, provides:                                                          
                    The Indopco decision does not affect the treatment                
               of advertising costs under section 162(a) of the Code.                 
               These costs are generally deductible under that section                





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