David J. Lychuk and Mary K. Lychuk, et al. - Page 102




                                       - 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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