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of ACC’s business.15 Petitioners make three assertions in
support of this argument. Petitioners first assert that the
salaries and benefits are fixed costs which flow from an
employment agreement and are not dependent upon the occurrence of
a capital transaction. In this regard, petitioners contend, the
amounts of the salaries and benefits paid by ACC are unaffected
by the quantity, principal amount, or duration of the installment
contracts, and those items would have been incurred even without
the acquisition of an installment contract. Petitioners assert
secondly that the salaries and benefits are deductible under a
literal reading of section 1.162-1(a), Income Tax Regs. The
relevant text of that section allows a taxpayer to deduct
reasonable compensation that is “directly connected with or
pertaining to the taxpayer’s trade or business”. Petitioners
assert thirdly that the salaries and benefits are deductible
under the established jurisprudence of First Sec. Bank of Idaho,
N.A. v. Commissioner, 592 F.2d 1050 (9th Cir. 1979), affg. 63
T.C. 644 (1975); First Natl. Bank of South Carolina v. United
States, 558 F.2d 721 (4th Cir. 1977); Colorado Springs Natl. Bank
v. United States, 505 F.2d 1185 (10th Cir. 1974); and Iowa-Des
Moines Natl. Bank v. Commissioner, 68 T.C. 872 (1977), affd. 592
15 The amicus for FNMA also advances this argument.
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