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origination/acquisition costs to be treated as deductible in the
year incurred.
2. The ANPRM and Announcement 2002-9
Petitioners suggest that, after the January 24, 2002,
issuance of the ANPRM and the February 15, 2002, issuance of (the
identical) Announcement 2002-9, which indicate the future
adoption of the 12-month rule, respondent was not substantially
justified in taking the position, expressed in the LMSB-SB/SE
memorandum, that IRS examiners should pursue the capitalization
of expenses that would be deductible under the 12-month rule
provided the issue had already been raised in a revenue agent’s
report or in a notice of proposed adjustment. Petitioners also
suggest that the LMSB-SB/SE memorandum is indicative of an
improper IRS policy (pursued in the consolidated cases) “to
continue with a case based on a litigating position that
Respondent will soon change, unless it is decided to be an
inefficient use of their resources.” We interpret petitioners’
position to be that, after the issuance of the ANPRM and
Announcement 2002-9, respondent was no longer substantially
justified in litigating the capitalization of either the
professional fees or the loan origination/acquisition costs.
The ANPRM and Announcement 2002-9 do not advise taxpayers of
an IRS decision to cease capitalizing costs related to
intangibles that had been previously subject to capitalization by
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