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there is no controlling rule. Petitioner, as the taxpayer, bears
the burden of establishing its right to deduct the disputed fees.
See INDOPCO, Inc. v. Commissioner, 503 U.S. at 84, 86; Welch v.
Helvering, 290 U.S. 111, 114-116 (1933); see also A.E. Staley
Manufacturing Company and Subs. v. Commissioner, 119 F.3d 482,
486 (7th Cir. 1997), revg. and remanding 105 T.C. 166 (1995).
When an expense creates a separate and distinct asset, it
usually must be capitalized. See, e.g., Commissioner v. Lincoln
Sav. & Loan Association, 403 U.S. 345 (1971); FMR Corp. & Subs.
v. Commissioner, 110 T.C. 402, 417 (1998); Iowa-Des Moines Natl.
Bank v. Commissioner, 68 T.C. 872, 878 (1977), affd. 592 F.2d 433
(8th Cir. 1979). When an expense does not create such an asset,
the most critical factors to consider in passing on the question
of deductibility are the period of time over which the taxpayer
will derive a benefit from the expense and the significance to
the taxpayer of that benefit. See INDOPCO, Inc. v. Commissioner,
supra at 87-88; United States v. Mississippi Chem. Corp., 405
U.S. 298, 310 (1972); FMR Corp. & Subs. v. Commissioner, supra at
426; Connecticut Mut. Life Ins. Co. v. Commissioner, 106 T.C.
445, 453 (1996). Expenses must generally be capitalized when
they either: (1) Create or enhance a separate and distinct asset
or (2) otherwise generate significant benefits for the taxpayer
extending beyond the end of the taxable year.
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