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that court: “The expenditures connected with the acquisition of
the broadcast license were no less capital in character because
they did not themselves contribute additional and specific
financial value to the license being sought. The important fact
is that the expenditures were made for the purpose of acquiring a
capital asset.” Dustin v. Commissioner, 467 F.2d at 50; accord
King Amusement Co. v. Commissioner, 44 F.2d 709 (6th Cir. 1930)
(fees paid to guarantors of rent under lease were capital
expenditures notwithstanding the fact that the fees added no
value to the lease or to the property leased thereunder), affg.
15 B.T.A. 566 (1929).
In making this assertion, petitioners focus solely on the
latter part of the text in section 263(a)(1); to wit, the phrase
“made to increase the value of any property”. We do not do
likewise. A proper reading of that section in full reveals that
the phrase relates to “permanent improvements or betterments” and
not to “new buildings”.31 Cf. Dustin v. Commissioner, 53 T.C. at
505. Here, we are dealing with salaries and benefits paid to
acquire capital assets (i.e., the installment contracts) and not
with expenditures made to improve or better property already
owned. We also bear in mind that the test for capitalization
31 Under the Treasury Department’s longstanding
interpretation of sec. 263(a) as set forth in sec. 1.263(a)-2(a),
Income Tax Regs., the cost of acquiring a long-term asset is an
example of a capital expenditure.
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