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Inc. v. Commissioner, 503 U.S. 79, 83-84 (1992). The primary
effect of characterizing a payment as either a business expense
or a capital expenditure concerns the timing of the taxpayer's
cost recovery. See INDOPCO, Inc. v. Commissioner, supra.
The cost of a capital asset is deductible only over the
useful life of the asset because "The Code endeavors to match
expenses with the revenues of the taxable period to which they
are properly attributable, thereby resulting in a more accurate
calculation of net income for tax purposes." INDOPCO, Inc. v.
Commissioner, supra at 84.
By the same token, it is a longstanding rule of law that if
a taxpayer incurs a business expense, but is unable to deduct the
cost of the same either as a current expense or through yearly
depreciation deductions, the taxpayer is allowed to deduct the
expense for the year in which the business ceases to operate.
See INDOPCO, Inc. v. Commissioner, supra at 83-84 (holding that
"where no specific asset or useful life can be ascertained, * * *
[a capital expenditure] is deducted upon the dissolution of the
enterprise."); Malta Temple Association v. Commissioner, 16
B.T.A. 409 (1929) (holding that the cost of a business asset, no
part of which has been returned to the taxpayer through
exhaustion deductions or as ordinary and necessary expense
3(...continued)
not deductible as a current expense.
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