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HALPERN, J., concurring in part and dissenting in part:
I concur in most of the majority’s report, but, like Judge Ruwe,
whom I join, I dissent from the majority’s treatment of the
overhead items-–printing, telephone, computer, rent, and
utilities (overhead).
I. Introduction
Petitioners’ S corporation, Automotive Credit Corporation
(ACC), cannot deduct its expenditures for the installment
contracts here in question because such expenditures are capital
in nature. They are capital in nature because each such
expenditure purchases for ACC the right to receive monthly
payments for a term ranging from 12 to 36 months. With respect
to the overhead, the question is whether ACC may deduct its
overhead costs related (but, in the majority’s view, only
indirectly related) to such capital expenditures. Principally
for the reasons set forth by Judge Ruwe, I do not believe that
they may. I write separately, however, to make the following
points: (1) The majority distinguishes between directly related
and indirectly related costs without telling us how to draw that
distinction. In short, the majority uses the quality of
relatedness not in support of any analysis but only to express a
conclusion (i.e., the overhead was not directly related to ACC’s
capital expenditures). (2) The majority’s analysis also risks
confusion with existing law (and accounting principles) that
distinguish “direct” costs from “indirect” costs. Moreover,
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