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a different setting. For example, in Commissioner v. Idaho Power
Co., 418 U.S. at 13, the Supreme Court observed the following as
to wages paid by a taxpayer in its 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. * * *
Similarly, in Ellis Banking Corp. v. Commissioner, 688 F.2d 1376,
1379 (11th Cir. 1982), affg. in part and remanding in part T.C.
Memo. 1981-123, the Court of Appeals for the Eleventh Circuit
observed as to business expenses in general:
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
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.
Accord American Stores Co. & Subs. v. Commissioner, 114 T.C. 458
(2000) (taxpayer required to capitalize legal fees incurred to
defend against State antitrust suit arising out of, and connected
to, prior stock acquisition); cf. Stevens v. Commissioner, 46
T.C. 492, 497 (1966) (otherwise deductible business expenses are
capital expenditures when paid to acquire a capital asset), affd.
388 F.2d 298 (6th Cir. 1968); X-Pando Corp. v. Commissioner, 7
T.C. 48, 51-53 (1946) (salary, rent, advertising, and traveling
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