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The majority advance three arguments for avoiding this
seemingly inescapable conclusion. First, the majority claim that
respondent “did not determine, and has declined to argue” that
the fees should be capitalized on the ground that they were
incurred in connection with the acquisition of capital assets.
Majority op. p. 11. Second, the majority assert that the fees
were paid to an insurer (the FDIC) in order to protect the
“integrity” of the insurer’s reserves. Majority op. pp. 19-22.
Third, the majority claim that the fees were deductible “cost
saving expenditures”. Majority op. pp. 22-23. None of these
arguments holds water.
Costs Incurred in Connection With Asset Acquisitions Are
Capital
Even normally deductible costs must be capitalized if they
are sufficiently related to the acquisition of a capital asset
(or to some other capital transaction). As the Supreme Court
stated in Commissioner v. Idaho Power Co., supra at 13:
Of course, reasonable wages paid in the carrying on of
a trade or business qualify as a deduction from gross
income. * * * But when wages are paid in connection
with the construction or acquisition of a capital
asset, they must be capitalized and are then entitled
to be amortized over the life of the capital asset so
acquired.
This Court has recently cited Idaho Power Co. to support the
holding that legal fees, like other expenditures that ordinarily
might qualify as currently deductible, must be capitalized if
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