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calculation of net income for tax purposes.” Id. at 84.
Furthermore, because deductions are matters of “legislative
grace”, “the burden of clearly showing the right to the claimed
deduction is on the taxpayer.” Id. (quoting Interstate Transit
Lines v. Commissioner, 319 U.S. 590, 593 (1943)).
In distinguishing between capital and ordinary costs, the
predominant factor for consideration is whether the payment
creates a future benefit that is more than incidental:
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. [Id. at 87.]
The creation or enhancement of a separate and distinct asset is
unnecessary. See id. An additional factor weighing in favor of
capital treatment arises where “the purpose for which the
expenditure is made has to do with the corporation’s operations
and betterment, sometimes with a continuing capital asset, 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)).
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