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Petitioner computed its amortization deductions using a 60-
month amortization schedule commencing in 1983 and 1984, the
years in which it incurred the trademark and trade name
expenditures. But, petitioner did not, and could not, claim
deductions for any “amortization” in 1983 and 1984 with respect
to its trademarks and trade name costs because it was tax exempt
during those years. Simply put, petitioner cannot comply with
the literal requirements of section 177(a) and section 1.177-
1(a)(2), Income Tax Regs.
Our reading of section 177(a) and the regulations thereunder
is also supported by the election rules specified in section
177(c). Section 177(c) provides:
SEC. 177(c). Time for and Scope of Election.--The
election provided by subsection (a) shall be made
within the time prescribed by law (including extensions
thereof) for filing the return for the taxable year
during which the expenditure is paid or incurred. The
period selected by the taxpayer under subsection (a)
with respect to the expenditures paid or incurred
during the taxable year which are treated as deferred
expenses shall be adhered to in computing his taxable
income for the taxable year for which the election is
made and all subsequent years.
Section 1.177-1(c), Income Tax Regs., which interprets section
177(c), provides:
(c) Time and manner of making election. (1) A
taxpayer who elects to defer and amortize any trademark
or trade name expenditure paid or incurred during a
taxable year beginning after December 31, 1955, shall,
within the time prescribed by law (including extensions
thereof) for filing his income tax return for that
year, attach to his income tax return a statement
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