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RUWE, J., dissenting: The majority refuses to consider
whether the exit and entrance fees should be capitalized as costs
incurred in connection with the acquisition of a capital asset
because the majority believes that respondent failed to include
this theory in his determination. The majority reads the notice
of deficiency too narrowly. Respondent’s determination, as
contained in the notice of deficiency, states:
It has been determined that your deductions for the
entrance and exit fee paid to the Federal Deposit
Insurance Corporation for the transfer of your insured
deposits from one depository insurance to another
depository insurance fund is a non-deductible capital
expenditure that is not subject to depreciation or
amortization.
The language contained in the notice of deficiency is broad and
disallows deduction of the fees simply because respondent
determined that the fees were capital expenditures.
The broad language contained in the notice of deficiency
should not have misled petitioner into believing that it did not
have to establish that the fees were not costs incurred in
connection with the acquisition of a capital asset. Petitioner’s
primary argument on brief was that the fees were for deposit
insurance coverage for the years in issue. Petitioner’s
alternative argument was that if the fees must be capitalized
then they are to be associated with the acquired deposits and
amortized over the useful life of the core deposits. Thus,
petitioner recognized that the fees might be viewed as being
incurred in connection with the acquisition of capital assets.
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