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property and (2) concerns the permanent improvement or betterment
of that property. Petitioners also contend that the installment
contracts are ordinary (and not capital) assets in the hands of
ACC. Second, they assert that the salaries and benefits are
expansion costs as to an existing business which, they contend,
are deductible under a line of cases including PNC Bancorp, Inc.,
v. Commissioner, 212 F.3d 822 (3d Cir. 2000); Briarcliff Candy
Corp. v. Commissioner, 475 F.2d at 781; Bankers Dairy Credit
Corp. v. Commissioner, 26 B.T.A. 886 (1932); and the credit card
cases. Petitioners also point to the following excerpt from the
legislative history under section 195:
In the case of an existing business, eligible startup
expenditures do not include deductible ordinary and
necessary business expenses paid or incurred in
connection with an expansion of the business. As under
present law, these expenses will continue to be
currently deductible. [H. Rept. 96-1278, at 11 (1980),
1980-2 C.B. 709, 712.]
Third, they assert that the salaries and benefits did not
generate a future benefit to ACC. They contend that the salaries
and benefits are not directly related to the acquisition of any
specific installment contract. They contend that the salaries
and benefits were predecisional expenses which generated
predominately short-term benefit. They contend that the salaries
and benefits did not themselves generate future income but only
allowed ACC to decide whether it would acquire an installment
contract.
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