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principle that a capital expenditure may not be deducted from
current income. It serves to prevent a taxpayer from utilizing
currently a deduction properly attributable, through
amortization, to later tax years when the capital asset becomes
income producing.” The thrust of these statements, in our minds,
is that an expenditure must be deducted in accordance with its
own individual identity, regardless of the possible recurrence in
the taxpayer’s business of that type of expense. A taxpayer’s
income will be distorted if the taxpayer currently deducts a
recurring expense that should be capitalized and the amount of
that expense fluctuates meaningfully between taxable years. For
example, when the amount of such an expenditure increases
significantly from one year to the next, the deduction of the
expenditure may result in the taxpayer’s income being understated
in the first year and overstated in the second, and the profits
of the business may appear to be sinking, when in fact it is
enjoying great success, or rising, when in fact it may be
seriously diminished. See Electric & Neon, Inc. v. Commissioner,
56 T.C. 1324, 1332-1333 (1971), affd. without published opinion
496 F.2d 876 (5th Cir. 1974). Such an inaccurate reporting of
this fluctuation thwarts, rather than fosters, “a major objective
of efficient tax policy.” Cabintaxi Corp. v. Commissioner, 63
F.3d 614, 619 (7th Cir. 1995), affg. in part, revg. in part, and
remanding on another issue T.C. Memo. 1994-316.
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