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and benefits attributable to those activities.13 The credit
review activities were so inexorably tied to and such an integral
part of the acquisition process that the portion of the salaries
and benefits attributable thereto must be considered as part of
the cost of the installment contracts. To be sure, the Supreme
Court in Commissioner v. Idaho Power Co., 418 U.S. at 13, even
considered the tools and materials used by the construction
workers, in addition to the wages of the workers themselves, as
part of the capital asset’s cost, as did the court in Ellis
Banking Corp. v. Commissioner, 688 F.2d 1376 (11th Cir. 1982),
with respect to office supplies, filing fees, travel expenses,
and accounting fees. We hold that the salaries and benefits are
capital expenditures to the extent that the parties have agreed
that those costs are attributable to the credit analysis
activities.14
13 As a matter of fact, ACC admitted as much in its PPM when
it stated:
In the event only a minimal amount of Notes are sold
pursuant to this Offering, the Company [ACC] would have
to downsize its operations and could, in fact, operate
with its current portfolio of retail installment
contracts with as few as three (3) individuals,
including the President of the Company, James Blasius.
14 To the extent that the specific work performed by each
individual as to the acquisition process is not contained in the
record, petitioners bear the consequences of any deficiency in
the record as they bear the burden of disproving respondent’s
determination that the costs of the services and benefits at
issue are capital expenditures.
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