- 23 -
expenses which would ordinarily be deductible may be a capital
expenditure if made to cultivate or develop business, the
benefits of which will be realized in future years).
The just-quoted observations of the Supreme Court and the
Court of Appeals for the Eleventh Circuit in the Idaho Power Co.
and Ellis Banking Corp. cases, respectively, reflect a
longstanding, firmly established body of law under which
expenditures incurred “in connection with” the acquisition of a
capital asset are considered capital expenditures includable in
the acquired asset’s tax basis.11 Commissioner v. Idaho Power
Co., supra at 13; see Woodward v. Commissioner, 397 U.S. at 575
(“It has long been recognized, as a general matter, that costs
incurred in the acquisition or disposition of a capital asset are
to be treated as capital expenditures”); see also Johnsen v.
Commissioner, 794 F.2d 1157, 1162 (6th Cir. 1986) (“costs
incurred in connection with the acquisition or construction of a
capital asset are capital expenditures”), revg. on other grounds
83 T.C. 103 (1984); Ellis Banking Corp. v. Commissioner, supra at
11 The Commissioner has had a similar longstanding view.
See, e.g., Rev. Rul. 73-580, 1973-2 C.B. 86 (portion of
compensation paid by corporation to its employees that is
attributable to services performed in connection with corporate
acquisitions is a capital expenditure); Rev. Rul. 69-331, 1969-1
C.B. 87 (bonuses and commissions paid by gas distributor to
secure long-term leases for hot water heaters are capital
expenditures); Rev. Rul. 57-400, 1957-2 C.B. 520 (commissions
paid by bank to brokers and other third parties for introduction
of acceptable applicants for mortgage loans are capital
expenditures).
Page: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: May 25, 2011