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Under INDOPCO, direct and indirect (e.g.,
overhead) costs that are similar to routine expenses
incurred by a taxpayer in the ordinary and normal
course of its business (e.g., salaries and insurance
fees) need not be capitalized unless they directly
relate to the acquisition, creation, or enhancement of
a specific capital asset or unless they directly
produce significant benefits to the taxpayer that
accrue to the taxpayer in future years.
Applying this statement of the INDOPCO capitalization test
to the fees involved in this case, it becomes clear that the fees
should be currently deductible. Relevant aspects of the fees are
described on pages 18-24 of the majority’s opinion. I would
emphasize that the fees --
(1) Were paid to the FDIC, the Federal governmental
agency which routinely supervises Metrobank in the
normal course of its business, not to Community, the
transferor of the deposit liabilities and not to third-
parties such as lawyers and financial advisers for a
specific service necessary to consummate the conversion
transaction;
(2) Were similar to other insurance fees that were
routinely paid by Metrobank to the Federal government
in the normal course of Metrobank’s banking business;
(3) Both in amount paid per year ($71,518) and in the
total cumulative amount paid over five years
($352,904), were generally less than Metrobank’s total
regular insurance premiums paid into the FDIC funds in
a single year (in 1993 and 1994, $465,046 and $463,583
respectively, and in 1995, $322,245);
(4) Did not provide Metrobank with any additional
insurance coverage with regard to its deposit
liabilities (including those transferred from
Community) and were not paid in lieu of the regular
future annual insurance premiums due;
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