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with the revenues attributable to them and recognizing
both during the same taxable year. When an outlay is
connected to the acquisition of an asset with an
extended life, it would understate current net income
to deduct the outlay immediately. * * *
6We do not use the term “capital asset” in the
restricted sense of section 1221. Instead, we use the
term in the accounting sense, to refer to any asset
with a useful life extending beyond one year.
Distinguishing between expenses that can be deducted under
section 162 and those that must be capitalized under section 263
is not always an easy task. As the Supreme Court has noted, “the
cases sometimes appear difficult to harmonize,” and “each case
‘turns on its special facts.’” INDOPCO, Inc. v. Commissioner,
supra at 86 (quoting Deputy v. Du Pont, supra at 496). After
considering all the facts and circumstances, we must determine
whether the costs incurred in defending the State of California’s
antitrust litigation are better viewed as costs associated with
defending a business or as costs associated with facilitating a
capital transaction. See Woodward v. Commissioner, 397 U.S. 572
(1970).
In Woodward, the Supreme Court rejected a subjective
“primary purpose” test in favor of the objective “origin of the
claim” test used in United States v. Gilmore, 372 U.S. 39 (1963).
Under the origin of the claim test, the nature of the transaction
out of which the expenditure in controversy arose governs whether
the item is a deductible expense or a capital expenditure,
regardless of the motives of the payor making the payment. See
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