116 T.C. No. 18
UNITED STATES TAX COURT
METROCORP, INC., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 19780-98. Filed April 13, 2001.
M, a State bank, acquired a portion of the assets
and assumed a portion of the deposit liabilities of C,
a failed Federal savings association. Before the
transaction, the deposit liabilities of M and C were
insured by different funds (B and S, respectively)
administered by the Federal Deposit Insurance
Corporation. The transaction was a “conversion
transaction” under 12 U.S.C. sec. 1815(d)(2)(B) (1994),
because M and C each participated in a different fund,
and M assumed C’s deposit liabilities. R determined
that the exit and entrance fees related to the
transaction which M paid to S and B, respectively,
under 12 U.S.C. sec. 1815(d)(2)(E) (1994), were non-
deductible capital expenditures. The fees were
capitalizable, R asserts, because they produced
significant future benefits to M in that M, following
the assumption, insured all of its deposit liabilities
through B. M’s use of B to insure all of its deposit
liabilities meant that M’s future costs for compliance
and insurance premiums would be lower than if M had
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