Metrocorp, Inc. - Page 17




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          future deposits always remained assessable by the SAIF, the                 
          financial institution utilizing this exception was not required             
          to pay the exit and entrance fees as to the conversion                      
          transaction.  See 12 U.S.C. sec. 1815(d)(3)(B), (G) (1994).  The            
          institution, however, could not during the moratorium period stop           
          paying SAIF assessments on the ascertained percentage of the                
          future deposits.  The institution could switch the insurance                
          coverage on those deposits, if it so desired, after the                     
          moratorium expired but only if the FDIC approved the switch and             
          the institution paid the requisite exit and entrance fees.                  
               With this backdrop in mind, we turn to the relevant text of            
          the Internal Revenue Code.  Section 162(a) generally provides               
          that a taxpayer may deduct "all the ordinary and necessary                  
          expenses paid or incurred during the taxable year in carrying on            
          any trade or business".8  Section 263(a)(1) generally provides              
          that a deduction is not allowed for "Any amount paid out for new            
          buildings or for permanent improvements or betterments made to              
          increase the value of any property or estate."  Whether an                  
          expense is deductible under section 162(a) or must be capitalized           
          under section 263(a)(1) is a factual determination for which                


               8 An expense is ordinary if it is of common or frequent                
          occurrence in the type of business involved.  See Deputy v. du              
          Pont, 308 U.S. 488, 495 (1940); Welch v. Helvering, 290 U.S. 111,           
          114 (1933).  An expense is necessary if it is appropriate or                
          helpful to the development of the taxpayer's business.  See                 
          Commissioner v. Tellier, 383 U.S. 687, 689 (1966); Welch v.                 
          Helvering, supra.                                                           





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