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(2) produces a significant benefit beyond the current taxable
year (significant future benefits), see INDOPCO, Inc. v. Commis-
sioner, supra at 87-89; Wells Fargo & Co. and Subs. v. Commis-
sioner, supra at 887; or (3) is in connection with the acquisi-
tion of a capital asset, Commissioner v. Idaho Power Co., 418
U.S. 1, 13 (1974).
It is petitioner’s position that the expenditures at issue
should be deducted under section 162(a) and not capitalized under
section 263(a). In support of that position, petitioner argues
that it paid the expenditures at issue in order to reduce its
future operating costs, viz., the future minimum annual basic
rent that the 1985 sale and leaseback required petitioner to pay
to the owner participants for the use of the AVS unit II, and
that, under Metrocorp, Inc. v. Commissioner, 116 T.C. 211 (2001),
and T.J. Enters., Inc. v. Commissioner, 101 T.C. 581 (1993), such
expenditures are deductible under section 162(a).
It is respondent’s position that the expenditures at issue
should be capitalized under section 263(a) and not deducted under
section 162(a). In support of that position, respondent argues
that petitioner paid the expenditures at issue in order to modify
and enhance a capital asset, viz., the 1985 sale and leaseback,
and that, under U.S. Bancorp & Consol. Subs. v. Commissioner, 111
T.C. 231 (1998), such expenditures must be capitalized.
The “decisive distinctions” between current expenses and
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