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E.XH I B i T A Examples of CaDi tat Exr~enditures "Capital expenditures" wit:yin the meaning of Section 103(b)(6)(D) of the Internal Revenue Ccde of 1954, as amended (the "Code"), are defined in Treas. Reg. § 1.103-10 (b)(2)(ii). That regulation provides generally that an expenditure is a "capital expenditure," (a) if it is properly chargeable to the capital account without regard to any rule of the Code which permits the expenditure to be treated as a current expense or (b) if it is able to be capitalized under any rule or election under the Code. however, an expenditure is not counted as a "capital expenditure" for purposes of the limitaticn in Section 103(b)(6){D) on bond issuance and capital e:tipenditures if it is financed out of the proceeds (excluding irvest:;ent earnings thereon) of the applicable bond issue or the outstanding principal amount of certain prior e:~empt small issues. The following are examples of "capital expenditures". 1. Costs allocable to t'Ze accuisition, construction, or erection of buildings, machinery and equipment, furni- ture and fixtures, and. similar property having a useful life substantially beyond the taxable year. See Treas. Reg. § 1.263(a)-2(a). See also Rev. Rul. 73-~80, 1973-2 C.B. 86 (compensation paid by corporation to employees to the extent attributable to corporate acquisitions is chargeable to capital account). Addressocran_h-ti'Iulticraph Ccrc., 4 T.C.M. 147 0 945) (legal fees paid to accuire assets in a reorganization must be capitalized); Mi ssissin~i Va11ev 'T'rL:st Co. v. U.S., 61 r.Supp. 451 (E.D. Mo. 1945), rev'd on other issued sub nom. Bleutermann y. U.S., 155 F.2d 597 (8th Cir. 1946) (appraisal costs must be capitalized); Southeastern Express Co., 19 B.T.A.-490 (1930), acc. as to issue 1, X-1 C.B. 61 (1931) (one-half of corporate general counsel's salary representing time spent in connection wilt. organization of a corporation must be capitalized). 2. COSt Of real property 1nC1L:d~ng water -_^htS, ease.^.:entS (see rcev. Rul. 80-IOC, 1980-1 C. n. 25) , the net cost of demoi~t~on of a building wizen real grope=~•/ is purchases with the intenticn of de:~o'_is hi :.g the