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trade or business:
Of course, reasonable wages paid in the carrying on of
a trade or business qualify as a deduction from gross
income. * * * But when wages are paid in connection
with the construction or acquisition of a capital
asset, they must be capitalized and are then entitled
to be amortized over the life of the capital asset so
acquired. * * *
Petitioner’s reliance on El Paso Co. v. United States, 694 F.2d
703 (Fed. Cir. 1982), and E.I. du Pont de Nemours & Co. v. United
States, 432 F.2d 1052 (3d Cir. 1970), to support the proposition
that expenses incurred in an antitrust defense are always
deductible is misplaced. As previously indicated, expenditures
which otherwise might qualify as currently deductible, must be
capitalized if they are incurred “in connection with” the
acquisition of a capital asset. Commissioner v. Idaho Power Co.,
supra at 13. As stated in Ellis Banking Corp. v. Commissioner,
688 F.2d 1376, 1379 (11th Cir. 1982):
The requirement that costs be capitalized extends
beyond the price payable to the seller to include any
costs incurred by the buyer in connection with the
purchase, such as appraisals of the property or the
costs of meeting any conditions of the sale. See,
e.g., Woodward v. Commissioner, 1970, 397 U.S. 572, 90
S.Ct. 1302, 25 L.Ed.2d 577; United States v. Hilton
Hotels Corp., 1970, 397 U.S. 580, 90 S.Ct. 1307, 25
L.Ed.2d 585. Further, the Code provides that the
requirement of capitalization takes precedence over the
allowance of deductions. �� 161, 261; see generally
Commissioner v. Idaha Power Co., 1974, 418 U.S. 1, 94
S.Ct. 2757, 41 L.Ed.2d 535. Thus an expenditure that
would ordinarily be a deductible expense must
nonetheless be capitalized if it is incurred in
connection with the acquisition of a capital asset.6
The function of these rules is to achieve an accurate
measure of net income for the year by matching outlays
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