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create or enhance a separate and distinct asset. The Court
noted, however, that the creation or enhancement of a separate
asset is not the sole determinant for capitalization. The Court
clarified its holding in Lincoln Savings, stating:
Nor does our statement in Lincoln Savings that
"the presence of an ensuing benefit that may have some
future aspect is not controlling" prohibit reliance on
future benefit as a means of distinguishing an ordinary
business expense from a capital expenditure. Although
the mere presence of an incidental future benefit--
"some future aspect"--may not warrant capitalization, a
taxpayer's realization of benefits beyond the year in
which the expenditure is incurred is undeniably
important in determining whether the appropriate tax
treatment is immediate deduction or capitalization.
Indeed, the text of the Code's capitalization
provision, section 263(a)(1), which refers to
"permanent improvements or betterments," itself
envisions an inquiry into the duration and extent of
the benefits realized by the taxpayer. [INDOPCO, Inc.
v. Commissioner, supra at 87-88; fn. ref. and citations
omitted.]
The Court concluded that the professional fees before them fell
within the longstanding rule that expenses directly incurred in
reorganizing or restructuring a corporate entity for the benefit
of future operations are not deductible under section 162(a).
The purpose for which these expenses are made, the Court stated,
"'has to do with the corporation's operations and betterment * *
* for the duration of its existence or for the indefinite future
or for a time somewhat longer than the current taxable year'".
Id. at 90 (quoting General Bancshares Corp. v. Commissioner,
326 F.2d 712, 715 (8th Cir. 1964), affg. 39 T.C. 423 (1962)).
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