David J. Lychuk and Mary K. Lychuk, et al. - Page 27




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          1379 (“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”); cf. A.E.              
          Staley Manufacturing Co. & Subs. v. Commissioner, 119 F.3d 482,             
          489 (7th Cir. 1997) (costs are capital expenditures if they are             
          “associated with” facilitating a capital transaction), revg. on             
          other grounds and remanding 105 T.C. 166 (1995); Central Tex.               
          Sav. & Loan Association v. United States, 731 F.2d 1181, 1184               
          (5th Cir. 1984) (“expenditures incurred in the acquisition of a             
          capital asset must generally be capitalized”); Commissioner v.              
          Wiesler, 161 F.2d 997, 999 (6th Cir. 1947) (“well settled rule              
          that expenditures incurred as an incident to the acquisition or             
          sale of property are not ordinary and necessary business                    
          expenses, but are capital expenditures which must be added to the           
          cost of the property”), affg. 6 T.C. 1148 (1946).                           
               Capitalizable expenditures are not limited to the actual               
          price that the buyer pays to the seller for the asset but                   
          include, for example, the payment of legal, brokerage,                      
          accounting, appraisal and other “ancillary” expenses related to             
          the asset’s acquisition.  Woodward v. Commissioner, supra at                
          576-577; see United States v. Hilton Hotels Corp., 397 U.S. 580             
          (1970); see also Ellis Banking Corp. v. Commissioner, supra at              
          1379.  Capitalizable expenditures also include compensation paid            
          for services performed in connection with an asset’s acquisition,           






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