- 71 -
See Commissioner v. Lincoln Sav. & Loan Association, 403 U.S.
345, 354 (1971) (“It is not enough, in order that an expenditure
qualify as an income tax deduction * * * that it serves to
fortify FSLIC’s [the predecessor of SAIF] insurance purpose and
operation”).
What all this means is that, even if the majority’s
characterization of the fees as insurance premiums is correct,
the fees nevertheless must be capitalized. As I’ve already
explained, ordinarily deductible expenditures must be
capitalized, when they are incurred in connection with the
acquisition of a capital asset. More generally, however,
insurance premiums that give rise to benefits extending beyond
the end of the taxable year must be capitalized, even if they are
not connected with the acquisition of a capital asset. See
Lincoln Sav. & Loan Association v. Commissioner, 51 T.C. 82, 94
(1968) (citing “long line of decisions by this Court holding that
prepaid insurance premiums are capital expenditures to be
expensed over the years in which coverage is actually obtained”),
revd. 422 F.2d 90 (9th Cir. 1970), revd. 403 U.S. 345 (1971);
sec. 1.461-4(g)(8) Example (6), Income Tax Regs. (where taxpayer
pays premium in 1993 for insurance contract covering claims made
through 1997, period for which premium is permitted to be taken
into account is determined under the capitalization rules,
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