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Thus, income tax regulations and the Supreme Court both
point to duration of the resultant benefit beyond the current
taxable year as a critical feature for distinguishing between
capital and ordinary.
Petitioner focuses on the “substantially beyond” terminology
in the regulations and argues that this test for capitalization
should be interpreted to mean “more than 1 year beyond the
taxable year”. Current deduction should therefore be allowed
where the benefit of an expenditure extends less than 12 months
into the subsequent tax period. This position, however, has at
least two significant shortcomings.
First, the cases cited by petitioner fail to support any
widespread existence of the rule for which petitioner contends.
As correctly noted by respondent, a significant number of the
cases cited simply hold that expenditures creating a benefit with
a duration in excess of 1 year must be capitalized. See, e.g.,
Jack’s Cookie Co. v. United States, 597 F.2d 395 (4th Cir. 1979);
Bilar Tool & Die Corp. v. Commissioner, 530 F.2d 708 (6th Cir.
1976), revg. 62 T.C. 213 (1974); Clark Oil & Refining Corp. v.
United States, 473 F.2d 1217 (7th Cir. 1973); American Dispenser
Co. v. Commissioner, 396 F.2d 137 (2d Cir. 1968), affg. T.C.
Memo. 1967-153; Fall River Gas Appliance Co. v. Commissioner, 349
F.2d 515 (1st Cir. 1965), affg. 42 T.C. 850 (1964); United States
v. Akin, 248 F.2d 742 (10th Cir. 1957); Hotel Kingkade v.
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