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benefits for the acquired entity. Petitioner argues that the
costs are deductible currently. Petitioner asserts that the
officers' salaries were part of the annual salaries that DBTC
agreed to pay the officers to conduct DBTC's everyday banking
business, and, although the officers worked on the transaction,
this work was tangential to the specific duties they were hired
to perform. Petitioner asserts that the other costs in dispute
represent ordinary and necessary expenses which DBTC incurred
primarily for investigatory and due diligence services related to
the expansion of its business and which, for the most part, were
incurred before DBTC's management decided to enter into the
transaction. Petitioner asserts that INDOPCO is not controlling
because it did not overrule a long line of cases (e.g.,
Briarcliff Candy Corp. v. Commissioner, 475 F.2d 775 (2d Cir.
1973), revg. and remanding T.C. Memo. 1972-43, and NCNB Corp. v.
United States, 684 F.2d 285 (4th Cir. 1982)), which allowed a
deduction for investigatory and due diligence costs incurred
incident to the expansion of an existing business. Petitioner
asserts that section 195 and its application to corporate
acquisitions support its position.
We agree with respondent that INDOPCO requires us to sustain
his determination. Section 162(a) provides a deduction for an
accrual method taxpayer like DBTC only for an expenditure that
is: (1) An expense, (2) an ordinary expense, (3) a necessary
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