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Discussion
We are faced once again with the question of whether an
expenditure may be deducted currently as an expense or must be
capitalized and deducted in a later year. Following INDOPCO,
Inc. v. Commissioner, 503 U.S. 79 (1992), in which the Supreme
Court clarified that nonasset-producing expenditures5 may require
capitalization if they provide significant future benefits to the
payor, the parties dispute whether petitioner’s entrance and exit
fees are capitalizable expenditures. Respondent determined and
asserts they are. Respondent’s sole argument in support of his
assertion is that Metrobank’s payment of the fees generated
significant future benefits for it. Respondent lists the
following as future benefits which are significant to Metrobank:
(1) Metrobank was able to insure its entire liability for
deposits through one fund, subjecting itself to only one
regulatory scheme and minimizing its risk of complicated
compliance problems; (2) insurance premiums under the BIF were
less than insurance premiums under the SAIF; and (3) the BIF was
more stable than the SAIF. Petitioner asserts it may deduct the
4(...continued)
financial institutions.
5 We use the term nonasset-producing expenditures to refer
to expenditures which do not create or enhance a separate and
distinct asset.
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