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In affirming our decision, the Court of Appeals for the Sixth
Circuit held that the mere fact that the expenses were recurring
and otherwise deductible business expenses was not enough to make
the expenses deductible under section 162. The court noted that
“Section 162 was primarily intended to cover recurring
expenditures where the benefit derived from the payment is
realized and exhausted within the taxable year” and that the
benefit from the expenses would not be exhausted within the year.
Stevens v. Commissioner, 388 F.2d at 300; accord Perlmutter v.
Commissioner, 44 T.C. at 403-405 (taxpayer required to capitalize
portion of salaries, utilities, insurance, depreciation, legal
and audit expenses, office expenses, and vehicle and truck
expenses allocable to the construction of shopping center
buildings).
We also are mindful of Wells Fargo & Co. & Subs. v.
Commissioner, 224 F.3d 874 (8th Cir. 2000), affg. in part and
revg. in part Norwest Corp. v. Commissioner, 112 T.C. 89 (1999).
There, a bank (Davenport) entered into a transaction with another
bank (Norwest) that resulted in Norwest’s owning all the stock of
an entity of which Davenport was a part. Following the
taxpayer’s concession that section 263(a) required that Davenport
capitalize the costs which were directly related to the
transaction, we were left to decide whether section 162(a)
allowed Davenport to deduct investigatory costs of $87,570, due
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