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• • <br />~~ -\ <br />~~ Exhibit A <br />Treas. Reg. §1.103-10(b)(2)(ii)(e) <br />- Capital Expenditures <br />"Section 103(b)(6)(D) capital expenditures" are <br />~~ defined in Treas. Reg. §1.103-10(b)(2)(ii). That regulation. <br />states for an expenditure to be a "Section 103(b)(6)(D) capi- <br />tal experditure'~, inter ali a, it must be properly chargeable <br />to the capital account wiTthout regard to any rule of the •- <br />Internal Revenue Code which permits the expenditure to be <br />treated as a current expense or it must be able to be capi- <br />talized under any rule or election under the Code. <br />The following are representative examples o= ex- - <br />_ penditures which, within the meaning of Treas. Reg. §1.103- <br />. 10(b)(2)(ii)(e), are properly chargeable to the capital <br />account or may be capitalized under the Code: . <br />.. <br />1. Costs allocable -to the accrui sition, cor_structi on, or <br />erection of buildings, machinery and ea•uipment, furni- <br />tune ar_d fixtures, and similar~p.~operty having a usezul <br />life substantially beyond the taxable year. See Treas. <br />_ Reg. §1.263(a)-2(a). See also Addressogra~h-Multigraph <br />Coru., 4 T.C.M. 147 (19x5) (legal fees paid to acquire <br />assets in a reorganization must be capitalized); Missis- <br />•~ S1DD1 Vallev Trust Co. v. U.S., 61 F.Supp. 451 (E.D. Mo. <br />1945), rev'd on other issues sub nom. Bueltermar~ v. U.S., <br />155 F.2d 597 (8th Clr. 1946) (appraisal costs paid nor <br />possession of premises must be capitalized); Southeastern <br />Express Co., 19 B.T.A. 490 (1930), acQ. as to issue 1, <br />X-1 C.B. 61 (1931) (one-half of corporate general coun- <br />sel's salary. representing time spent in connection with <br />organization of a corporation must. be capitalized). <br />2. Interest on a cor_struction loan, interest on a loan to <br />purc:~ase real property, interest on a loan to purchase, <br />transport, or install personal property, and interest <br />on a mortgage of unimproved and unproductive real pro- <br />perty and other items (including certain taxes and <br />insurance payments) permitted to be capitalized under <br />Section 266 of the CodeTand the regulations thereunder, <br />even `hough deducted as expenses or. principal user's <br />tax return. Rev: Rul. ~ 75-135, 1975-1 C.B. 43; Rev. <br />Rul. 77-262, 1977-2 C.B. 41 (amount of capital ex~endi- <br />• tunes not offset by income from investing proceeds <br />