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Nor do we read anything in section 263 or the related
regulations that hinges section 263(a)’s applicability to an
expenditure on a finding that an asset acquired or created by the
expenditure was used outside of the taxpayer’s daily business.
In fact, if such was the case, the costs incurred to acquire
manufacturing equipment would arguably be deductible because that
equipment is indispensable to the daily operation of the
manufacturer’s business. Moreover, in the case of an appraisal,
the costs of which are clearly capital expenditures when incurred
in connection with the purchase of property, the appraisal
neither adds value to the appraised property nor has a long-term
life. We also note our disagreement with the concept that a cost
is a capital expenditure only if it becomes part of an asset. To
be sure, the depreciation of the equipment used to construct the
facilities in Commissioner v. Idaho Power Co., 418 U.S. 1 (1974),
did not become an actual part of those facilities.
Nor do we find persuasive PNC’s argument to the Court of
Appeals for the Third Circuit that our application of the
“separate and distinct asset test” of Commissioner v. Lincoln
Sav. & Loan Association, 403 U.S. at 354, was too expansive in
that it would require capitalization of costs incurred “in
connection with” or “with respect to” the acquisition of an
asset. PNC Bancorp, Inc. v. Commissioner, 212 F.3d at 830. Such
an argument conflicts directly not only with the Supreme Court’s
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