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(collectively, offering expenditures) relating to its
offering of notes in 1993 and a second offering that
was planned in 1993 and abandoned in 1994.
Held: The salaries and benefits are capital
expenditures; A’s payment of these items was directly
related to its anticipated acquisitions of assets with
expected useful lives exceeding 1 year.
Held, further, The overhead expenses may be
deducted currently under sec. 162(a), I.R.C.; A’s
payment of these items was not directly related to the
anticipated acquisitions, and any future benefit that A
received from these expenses was incidental to its
payment of them.
Held, further, sec. 165(a), I.R.C., allows A to
deduct the portion of the capitalized salaries and
benefits that was attributable to installment contracts
which it never acquired; A may deduct those amounts for
the respective years in which it ascertained that it
would not acquire the related contracts.
Held, further, A must capitalize all of the
offering expenditures; A’s payment of these
expenditures was anticipated to provide A with
significant future benefits.
Held, further, sec. 165(a), I.R.C., allows A to
deduct in 1994 the portion of the capitalized offering
expenditures that was attributable to the abandoned
offering.
Oksana O. Xenos, for petitioners.*
Eric R. Skinner, for respondent.
LARO, Judge: Petitioners petitioned the Court to
redetermine deficiencies attributable primarily to adjustments
which respondent made to their income from a subchapter S
* Briefs of amici curiae were filed by Robert A. Rudnick, B.
John Williams, Jr., James F. Warren, and Richard J. Gagnon, Jr.,
as counsel for Federal Home Loan Mortgage Corporation (FHLMC),
and by Felix B. Laughlin and Anna-Liza Harris as counsel for
Federal National Mortgage Association (FNMA).
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