- 99 -
That, of course, is not to say that overhead would not be
materially affected if none of the contract acquisition activity
were continued.
VI. Conclusion
I am not here arguing for a rigid rule, requiring allocation
of overhead in all cases where overhead is related to a capital
activity. See, e.g, Dunlap v. Commissioner, 74 T.C. 1377, 1426
(1980) (no capitalization required for overhead where capital
activity (acquisition of banks) was incidental to taxpayer’s
principal business of holding and managing banks, revd. and
remanded on another issue 670 F.2d 785 (8th Cir. 1982)).2 I am,
2 The majority states: “[W]e conclude that any future
benefit that ACC realized from these expenses was incidental to
its payment of them so as not to require capitalization”.
Majority op. p. 30. The majority has failed, however, to explain
or quantify that finding. Without the overhead, the acquisition
activity would, at the least, have been substantially reduced.
Judge Swift, in his concurring opinion, suggests that any
benefit derived by ACC from both salaries and overhead associated
with the credit analysis activities was incidental to ACC’s
primary business activity: the holding of installment loans. He
would, therefore, permit a current deduction for both. Judge
Swift’s position is based upon his finding that any benefits
associated with the credit analysis activities “were exhausted or
lost by ACC almost simultaneously with the receipt of the
benefits”; i.e., most of the installment loans were immediately
rejected. Swift, J., concurring op., p. 73. He also views such
activities as “investigatory activities” the costs of which are
currently deductible.
I believe that all of the credit analysis activities related
to the purchased loans. Therefore, the costs of that activity
should be capitalized. The acquisition of installment loans was
an essential part of ACC’s business, and an unavoidable cost of
(continued...)
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