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In his notice of deficiency (the notice), respondent explained
the adjustments giving rise to the deficiencies related to the
payments as follows:
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 [fund] to
another depository insurance fund is a non-deductible
capital expenditure that is not subject to depreciation
or amortization. Accordingly, your taxable income is
being increased as follows: [$71,518 for each year].
In the petition, petitioner assigned the following errors to
respondent’s adjustments:
The Commissioner erred in disallowing petitioner’s
payment of $71,518 to the Federal Deposit Insurance
Corporation as an ordinary and necessary business
expense. The expenditure is allowable as an ordinary
and necessary business expense pursuant to Section
162(a) and Treas. Reg. � 1.162-1(a).
By the answer, respondent denied petitioner’s assignments of
error. Respondent did not, however, disagree with petitioner’s
averments, which, in substance, reflect the facts stipulated.
Petitioner filed no reply.
III. Discussion
A. Introduction
The details of the purchase are not in controversy. The
pleadings establish that the only issue for decision is whether
the payments entitle Metrobank to a deduction pursuant to section
162(a) and section 1.162-1(a), Income Tax Regs. Section 162(a)
allows “as a deduction all the ordinary and necessary expenses
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