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reasoning in Commissioner v. Idaho Power Co., supra at 12-14, and
Woodward v. Commissioner, 397 U.S. at 575-576, but with the
reasoning of various Courts of Appeals that have required
capitalization of amounts incurred “in connection with” the
acquisition of an asset. See, e.g., Johnsen v. Commissioner, 794
F.2d at 1162; Central Tex. Sav. & Loan Association v. United
States, 731 F.2d at 1184; Ellis Banking Corp. v. Commissioner,
688 F.2d at 1379.
Nor do we believe that the fact an expenditure is somehow
connected to the “needs of current income production” is enough
to qualify that expenditure as a current deduction. PNC Bancorp,
Inc. v. Commissioner, 212 F.3d at 829, 833-834 (citing National
Starch & Chem. Corp. v. Commissioner, 918 F.2d 426 (3d Cir.
1990), affd. sub nom. INDOPCO, Inc. v. Commissioner, 503 U.S. 79
(1992). In our minds, an expenditure that produces both a
current and long-term benefit is neither 100 percent deductible
nor 100 percent capitalizable. Instead, regardless of whether
the expenditure’s primary or predominant purpose is to benefit
significantly the business’ current operation, on the one hand,
or its long-term operation, on the other hand, the expenditure is
a capital expenditure to the extent that it produces a
significant long-term benefit and deductible to the remaining
extent. See Woodward v. Commissioner, 397 U.S. at 577-579;
Commissioner v. Idaho Power Co., supra; Great N. Ry. v.
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