- 6 -
If he did that, he would be over 100-and-some
years, which we know he’s 75 now. He would never
recoup that money back. He can’t recoup the money back
at all unless he can, you know -- you couldn’t charge
enough rent to recoup what the damage was in our life-
time is what I’m saying.
According to petitioners, they would not have made the expendi-
tures at issue on the 40th Street property and the 8th Street
property during each of the years 2000 and 2001 if they had not
believed that the entire amount of such expenditures is deduct-
ible for each of those years. Instead, they would have abandoned
those properties.
Section 263(a) provides that “No deduction shall be allowed
for--(1) Any amount paid out for new buildings or for permanent
improvements or betterments made to increase the value of any
property or estate.” Section 263(a) denies a deduction for an
expenditure for the year the expenditure is incurred when the
amount paid or incurred: (1) Creates or enhances a separate and
distinct asset, see Commissioner v. Lincoln Sav. & Loan Associa-
tion, 403 U.S. 345, 354 (1971); Wells Fargo & Co. & Subs. v.
Commissioner, 224 F.3d 874, 882 (8th Cir. 2000), affg. in part
and revg. in part 112 T.C. 89 (1999); (2) produces a significant
benefit beyond the current taxable year, see INDOPCO, Inc. v.
Commissioner, supra at 87-89; Wells Fargo & Co. & Subs. v. Com-
missioner, supra at 887; or (3) is in connection with the acqui-
sition of a capital asset, Commissioner v. Idaho Power Co., 418
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