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the property's basis or, in the alternative, (2) these fees are
deductible expenses. Neither party disputes that these fees were
actually paid by Corbin West to CDC.
Under section 1.263(a)-2, Income Tax Regs., acquisition
costs of property must be capitalized. Included as acquisition
costs are expenditures that result in the taxpayer's acquisition
of a capital asset, such as survey fees, attorney's fees for
drafting documents, and real estate commissions. Godfrey v.
Commissioner, 335 F.2d 82 (6th Cir. 1964), affg. T.C. Memo. 1963-
1; Burman v. Commissioner, 23 B.T.A. 639 (1931).
A. "Acquisition Fee" and "Developer's Fee"
Corbin West capitalized $157,500 as an "acquisition fee" and
$87,213 as a "developer's fee" into the property's basis.
Petitioner presented two exhibits at trial detailing the services
performed or to be performed by it for both of these fees. The
services included, among other things, the following: (1)
Arranging for an option to acquire the property, (2) evaluating
zoning requirements and ensuring compliance, (3) arranging and
evaluating an environmental report relating to the property, and
(4) establishing guidelines for compliance with the low-income
housing tax credits requirements.
We conclude that the "acquisition fee" and "developer's fee"
were incident to Corbin West's acquisition of the property, and
they must be considered part of the property's acquisition cost.
We therefore conclude that Corbin West is entitled to capitalize
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