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corporation, Automotive Credit Corporation (ACC). Respondent
determined a $1,202 deficiency in the 1993 Federal income tax of
David J. and Mary K. Lychuk. Respondent determined $2,149 and
$11,461 deficiencies in the 1993 and 1994 Federal income taxes,
respectively, of Edward C. and Virginia M. Blasius. Respondent
determined $23,683 and $89,609 deficiencies in the 1993 and 1994
Federal income taxes, respectively, of James E. and Mary Jo
Blasius.2 Both Blasius couples alleged in their respective
petitions that they had an overpayment for 1994 on account of
costs which ACC failed to deduct for that year.
Following concessions, we must decide whether ACC must
capitalize certain expenditures made during 1993 and 1994. The
expenditures were generally ACC’s payment of (1) salaries,
benefits, and overhead (printing, telephone, computer, rent, and
utilities) relating to its acquisition of retail installment
contracts (installment contracts) in the ordinary course of its
business (installment contracts expenditures) and (2)
professional fees and commissions relating to a private placement
offering of notes that ACC accomplished in 1993 and a second
offering that ACC planned in 1993 and abandoned in 1994
(collectively, PPM expenditures). We hold that ACC must
capitalize both groups of expenditures to the extent described
herein. We must also decide whether ACC may deduct the portion
2 James Blasius is Edward Blasius’ son.
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