*1 principle ognized right by trespass of trial on “the substance of the common- by jury secured the seventh amendment right law of trial by jury.” It raises a trial by jury superinten- means under the procedural question whose may resolution judge. of a Relying primarily dence on vary from case to case. by Tested these criminal cases that antedate the 1966 principles, substitution is not by forbidden 25,14 amendment to Rule Ford contends the seventh amendment. proceeding that after the death of a trial Because the district court’s order denying judge by substituting judge another “con- affirmed, mistrial should be we dissent. travenes the seventh amendment.” accept, course, proposition We by jury

trial jury super- means a under the judge.

intendence of a Capital Trac- See Hof, 1, 13-14,

tion v. Co. U.S. S.Ct. 43 L.Ed. 873 But we can- accept Ford’s the sev-

enth requires amendment a mistrial when judge dies jury before the returns a CORPORATION, NCNB a North Caroli- pertinent verdict. The provision of the sev- Corporation; na North Carolina enth amendment is: “In suits at common Bank, Appellees, National right law ... by jury of trial shall be ” v. preserved Battin, .... Colgrove America, UNITED STATES of

(1973), Appellant. the Court provision held that this the amendment require jury did not of 12 No. 78-1771. persons. In reaching this conclusion the Appeals, States Court of said, 156-57, Court 413 U.S. at Fourth Circuit. 2451-52: Consistently with objec- the historical Argued Oct. 1981. Amendment, tive of the Seventh our deci- July Decided sions have jury right pre- defined the served in by cases covered the Amend-

ment, as “the substance of the common- right

law of trial jury, distinguished

from procedure mere matters of form or ” Amendment, therefore, .... does

not “bind the federal courts to the exact

procedural incidents jury or details of according

trial to the common law in

1791,” and devices be used to “[n]ew

adapt the ancient present institution to

needs and to make of it an efficient in- strument jus- the administration of ”

tice .... [citations omitted]

Applying principles, these we conclude the seventh amendment does not re-

quire that the proceedings must be conduct- judge.

ed the same Resumption aof judge

trial after the death of a does not See, e.g., Simons v. United (2d 227 F. 732 1941); Freeman v. United

tion, granted a rehearing en banc of panel decision in Corporation NCNB which reversed the district court and held for the United States. We now vacate the panel decision and affirm the judgment of court, the district although our reasoning may not be the same. Chenery, S. E. C. v. 87 L.Ed. 626 I At issue in this proper case is the treat- ment, purposes for of income tax computa- tion, of certain incurred NCNB in activities connected with its state- banking wide branch system. North Caroli- na National Bank was formed in 1960 through merger of banks in Charlotte Greensboro; and in subsequent years, NCNB, through mergers other and the opening of branches in numerous North cities, Carolina largest has become the bank in the state. In the between 1970 instance, and for opened bank branches, new including 21 offices in cities where the bank had previously op- had erations. part

As of the expansion process and as a part banking of branch which is its busi- Cohen, Div., Dept, Jonathan S. Tax ness, variety expenses. NCNB incurred a Justice, Washington, (Harold D. C. M. Ed- Besides constructing the obvious cost of and wards, Asheville, C., Atty., U. S. N. M. Carr facilities, equipping new the bank conduct- Ferguson, Gen., Atty. Asst. Gilbert E. An- studies, ed various market feasibility and drews, Rosenfeld, Div., Dept, Aaron Tax devoted staff time planning imple- and Justice, C., brief), Washington, D. on for menting expansion projects, completed appellant. process by applying permission for from Jr., Charlotte, Ayscue, E. Osborne N. C. Comptroller of the Currency open (John Johnston, W. Higgins, William H. and relocate During various facilities. Helms, Johnston, Charlotte, C., Mulliss & N. years capitalized 1965-70 the bank the costs brief), appellees. on building equipping connected with new facilities, pursuant to Internal Revenue WINTER, Judge, Before Chief however, Code 263. The taxpayer, de- BUTZNER, RUSSELL, WIDENER, HALL, expenses ducted as current other costs in- MURNAGHAN, SPROUSE, ERVIN and curred in the CHAPMAN, process, pursuant to Judges. Circuit IRC 162. The Commissioner of Internal WIDENER, Judge: Circuit Revenue deficiency respect asserted a returns, Appellee arguing to the bank’s tax taxpayers, North Carolina Na- tional parent Corpora- Bank and its NCNB costs taken as current actually capitalized.1 quately explored panel opinion The Com- should have been the ex- maintained that none of Kg. missioner elsewhere. 651 F.2d 948-53. S. David expenditures be- son, were current penditures Schindler, Weil, J. Stickney C. & R. of fu- production cause related to Accounting, Financial 279-299 It 947). The tax- (651 income. F.2d at ture noted, should be though, that neither courts *3 deficiencies and paid the assessed payer accounting profession nor the have devised refunds in the district timely then sued for universal, foolproof a method of distin NCNB, con- The trial court held for coúrt. guishing expenses capital current from opening the of a new branch cluding that costs. As the Court remarked: “The stan nothing corporeal or sala- “produces bank dard up by set the statute is not a rule of with- capital It does not create a asset ble. law; it is rather way a of life. Life in all Internal Revenue meaning in the supply its fullness must the answer to the The at issue Code of 1954.” 111, riddle.” Helvering, Welch v. 290 U.S. necessary expenses were thus 115, 8, 9, 54 (1933). S.Ct. 78 L.Ed. 212 162(a), under IRC it held. and deductible 162(a) Section of the Internal Revenue concluded, however, panel This court’s Code sets forth five criteria for evaluating applied court had an incor- that the district expenditure whether an is a current ex- legal and reversed. 651 F.2d rect standard pense. panel majority at 947. The reasoned that (1) “paid item must or incurred [A]n propriety deducting expenses the of must during (2) the year,” taxable be for light be considered in of rule ex- “[t]he “carrying any business,” (3) on trade or pressed Corp. ... Richmond Television v. [in “expense,” (4) be an be a “necessary” 901, (4th Cir.), United 907 expense, (5) “ordinary” be an ex- 68, grounds, vacated on other 382 U.S. 86 pense. 233, 143, original holding Commissioner v. Lincoln & Loan reaffirmed, (4th on this issue F.2d Association, 1893, U.S. 91 S.Ct. 1965) requiring matching Cir. of reve- ] 1898, The principal appropriate nues and costs in the account- ” issue in this case as in most such cases is ing period.... 651 F.2d at 948. The expenditure whether the is “ordinary and panel from the concluded benefits ex- necessary.” Supreme The grap Court has penditures question beyond extended times, pled problem with the several accounting years and initial individual thus the ly 111, Helvering, Welch v. taxpayer could not deduct them as current (1933). Welch, 78 L.Ed. 212 expenses years incurred. Id. at 962- S.Ct. a bankrupt corporation former officer of a paid several debts incurred corpora II sought tion and then expense to deduct the protect as a cost to question reputation. The his particular of whether ex- 112-13, at Id. 54 S.Ct. at 8-9. The penditures properly are more Commis charged sioner of expense capitalized long argued current or has been Internal Revenue point capital a of contention between those taxed were in nature because and the ordinary expenditures Internal Revenue Service. It is for an unnecessary explain 115,54 for us to the account- individual to make. Id. at S.Ct. at 9. ing Supreme behind these confrontations as it is ade- The agreed, noting, Court “Repu- important recognize It is that none of the uments the IRS divided some of these challenged pertain buildings figures by computing deductions a factor of four before equipment acquired part amount of tax owed. It is not clear from the program. challenged expenditures The total record and the briefs how the IRS arrived at $1,029,480.50 period. why over the 1965-70 This the allocation of internal costs or it divid $199,480.50 expendi figure expenses by includes in external ed the claimed current four before consultant, attorney governmen reducing computing unpaid tures for the deduction and $830,000 computations tal fees and allocation of inter for an taxes. Such are not before us on expenditures. appears appeal. nal It from various doc including hand, panel are akin to decision at which learning

tation and as- money spent acquiring .... expenditures providing sets hold that benefits wisely spent. It is not an them well and beyond for a one must be 115-16, Id. ordinary expense.” 54 S.Ct. capitalized. adopted court one- This at 9-10. year rule in Richmond Television 1965), The Court has considered differences be- F.2d 901 expenditures sev- tween and current grounds, vacated on other 382 U.S. but most decisive- subsequently,2 eral times 143, original holding L.Ed.2d ly v. Lincoln & reaffirmed, on this issue Association, Loan 403 U.S. 91 S.Ct. where we said: L.Ed.2d 519 Sav- system attempts Our of income taxation ings deductibility & Loan concerned to match income and savings payment by institution to *4 year only taxable as to tax so net income. a federal agency. reserve fund held Id. therefore, taxpayer A not as may, deduct 348, deciding In at 91 S.Ct. at 1896. wheth- a expense current business the full cost payment er the a contribution was to an asset, acquiring tangible an or intangible, asset or an the Court expense, said: which the taxpayer benefits for more important controlling, What is we year. concept than one The has been feel, payment is that the ... serves to explained Akin, in 248 United States v. create or for Lincoln what is enhance 742, (10th F.2d Cir. 744 essentially separate a distinct addi- expenditure should be as treated “[A]n that, tional as an asset and inevitable one in of a capital outlay the nature if consequence, capital is in payment the brings it the acquisition about expense, nature and not an let alone an asset a having of useful in life expense, deductible under year, excess of or if it 162(a)... one secures a like advantage the which has 354, 403 U.S. at 91 S.Ct. 1899. While year.” life of one more than concluding contribution to the re- serve capital, fund was Court in Lincoln (footnote 345 omitted). F.2d at 907 We Savings rejected specifically & Loan subsequently applied one-year rule expenditure was not de- Darlington-Hartsville Bottling Coca-Cola simply ductible because had an effect States, v. (4th Cir.), Co. United 393 F.2d 494 beyond year: one denied, 962, 402, cert. 393 U.S. 89 S.Ct. 21 presence ensuing of an benefit that [T]he (1968) (amounts L.Ed.2d spent pur 376 may aspect have some future is not con- syrup chase soft capi drink contracts were trolling; many expenses concededly de- tal expenditures), and v. Georator prospective ductible have benefit beyond United 485 year. the taxable denied, 945, 3069, cert. 417 U.S. 94 41 S.Ct. Id.3 (1974) (legal L.Ed.2d 665 resisting fees for

The is cancellation of ex language particularly impor- latter trademark were circuit, light penditures). tant in in this one-year certainly decisions rule is Winmill, 298, E.g. 79, Corp., 908, Helvering 305 v. U.S. 59 405 U.S. 92 S.Ct. 45, duPont, Deputy Co., (1938); (1972); S.Ct. 83 L.Ed. 52 v. 217 Commissioner v. Idaho Power 363, 488, (1940); 1, 2757, 84 308 U.S. 60 L.Ed. 416 S.Ct. 418 U.S. 94 S.Ct. 41 535 L.Ed.2d Commissioner, (1974). Interstate Transit v. 319 Lines 590, 1279, (1943); 87 U.S. 63 S.Ct. L.Ed. 1607 Heininger, 467, Commissioner 320 U.S. v. 64 one-year may apply 3. The rule still in situations 249, (1943); S.Ct. 88 171 L.Ed. involving capital investments co- banks for Tellier, 687, 1118, v. 86 S.Ct. 383 U.S. 16 operatives under the created Farm Act Credit (1966); L.Ed.2d 185 v. Woodward Commission- 1933, seq. 12 1134 §§ U.S.C. et er, 1302, 572, U.S. 90 S.Ct. L.Ed.2d 577 Mississippi Corp., States v. 405 U.S. Chemical (1970); Corp., v. Hilton United States Hotels 908, 915, L.Ed.2d U.S. 90 S.Ct. L.Ed.2d 585 (1970); Mississippi United States Chemical Wehrli, conceptual simplicity, but as United States v. appealing in its 1968) (footnote notes, citing opinion & Loan Richmond the Lincoln opinion Television and the district court beyond with effects one numerous Darlington-Huntsville examples as of cases readily One need not year are deductible. utilizing one-year rule has been omit corpo- the ease of the consider further than ted; emphasis added); accord Southland significant, spends executive who rate Royalty v.Co. United indeterminable, of his time though amount (Ct.C1.1978), denied, cert. planning to realize that universal on future impossi- the one rule is application of applied not ble and that it has been so light of the unmistakable lan guage in Lincoln such cases. & Loan that “the presence of an ensuing benefit ... Circuit, adopt- The Tenth from which we controlling,” we conclude that such parts of rule, one-year subsequently: has said ed the Television, Darlington-Hunts Richmond In our search for a more definite for- ville, may interpreted and Georator as mula for resolution of line-draw- establishing one-year standard for distin ing process, we evolved what be guishing costs, between and current thumb, un- “one-year” called the rule of longer are no authoritative.4 This does not expenditure capi- der which an should be ignore mean that courts are to long brings acquisition “if it talized about term characteristics of in de *5 having period a of useful life of an asset ciding particular whether capital costs are in excess of one or if it secures a like current; rather, length of the ensu advantage taxpayer to the which has a ing benefit is but one factor under consider King- year.” life of more than one Hotel ation. kade v. of Internal Reve- nue, Cir., 310, 180 F.2d 312. This Ill concept accept- has received rather wide We turn now to application of the Lin- ance, urged arbitrary and we are to make Savings coln & Loan standard to the facts think, application of it here. We how- expenditures before us. The question ever, that it was intended to serve as a types: studies, are of three metro feasibili- guidepost mere for resolution of studies, ty applications Comptrol- and to the issue, ultimate rule not as absolute ler of the Currency. Metro studies were requiring capitalization the automatic long range planning reports making recom- every expenditure providing plotting strategies mendations and enduring with a for a benefit regions NCNB various of North Carolina. year. Certainly excess of one the ex- These studies existing concerned both facili- pense replacement incurred in the of a opportunities ties and were lock, windowpane, damaged broken or a prepared internally both outside door, periodic repainting or even a of the Feasibility consultants. studies focused on structure, may entire well be treated as-a- particular proposed locations, branch evalu- repair expenditure deductible even ating the options. economics of various though quite beyond the benefits endure Preparation reports of these came after year. (651 the current 946-47). metro studies. Ap- F.2d at Cir., 1981), slip op. (applying 4. This statement is intended to forestall future at 16-17 panels Co., difficulties between as to whether Lin Barnett v. W. T. Grant 518 F.2d 543 superseded Co., coln & Loan has Richmond with Hill v. Western Electric TV, al., 99, proper appli 101, denied, et in this circuit as to the 596 F.2d cert. 444 U.S. rule, one-year cation (1979), of the for we hold that it which de problem panel holding has. Our with a that a apply clined to Barnett for the stated reason Supreme superseded decision has superseded Court an ear that it had been East Texas panel lier decision was noted in Chisholm v. U. Freight Rodriguez, Motor 431 U.S. Service, (4th Cir. S. Postal 665 F.2d 482 52 L.Ed.2d 453 Inc., Drugs, Cf. Brown v. Eckerd plications Comptroller were for the franchise division. The Commissioner said statutorily required permission for a the expenses nation- actually capital were in nature ally open chartered bank to branch offices.5 because were incurred in obtaining 159 fee, dealer application Costs incurred included the contracts. The contracts were said time to constitute preparation capital internal staff of the assets of the fran- chise application, attorneys’ fees and division. Id. at related 778-80. The Second Circuit, citing Loan, expenses prosecution connected with & re- jected the application. Commissioner’s the expenditures in nature be- important recognize It is cause benefits from them extended into fu- expenses all of these were connected with years. ture Id. at 785-86. The court said developing and operating NCNB’s a state would be only if banking wide network of branch facilities. they served to create separate or enhance a position In order to maintain its and distinct additional Turning asset. industry, necessary NCNB found it to con the issue of whether the contracts were tinually explore the market for its varied assets, such the court stated that an ex- services and facilities. It is long recog penditure is “capital only asset” if “at the principle nized of tax law that time it is furnished to the company, it has protection for the existing of an invest an ascertainable and measurable value— ment, the existing continuation of an busi is, a value in money or a fair market ness, preservation or the income value.” Id. at Noting that there is no from loss or diminution are special statutory “capital definition of as- business within the 263,7 set” for IRC 162 and §§ the court said meaning of IRC 162. Candy Briarcliff the term must be taken in its “usual and Revenue, v. Commissioner of Internal customary business sense as items of owner- (2nd 1973).6 ship permanent of a or fixed nature which opinion Second Circuit’s Briarcliff are convertible into cash.” 475 F.2d at 786. particular interest in the ease before us. The Second Circuit concluded that the con- *6 candy Briarcliff involved a company which tracts were assets and thus ex- products had sold its primarily through a penses obtaining incurred in them were not company chain of owned stores in urban capital costs. Id. at 787. The Briarcliff Demographic changes centers. forced the reasoning applicable in the instant case company to seek markets for products its in NCNB, because like the Briarcliff taxpayer, suburban areas. When company owned expanding was its business into new territo- suburban stores failed to attract satisfacto- not, however, ries. We do hold as determi- business, ry company develop decided to native the fact that the branch banks could a network of franchised dealers. 475 F.2d not be turned into cash. But that ais company, 777. The preparing its in- factor to consider in determining whether returns, come tax treated the costs of devel- “separate were and distinct additional oping network, such as sales calls and within meaning of Lincoln asset[s]” magazines, advertisements in trade as de- Savings & Loan. The costs NCNB incurred expenses. ductible The Commissioner disal- exploring such analogous are deductions, lowed the however, reasoning to the costs in Briarcliff developing promotional expenses these were dis- franchise network. Particularly relevant is tinct operating expenses from the rejection Second Circuit’s of the Com- category expenses asset,” Also included in this “capital 7. While IRC 1221 defines securing permission purpose incurred in determining capital from Bahamian does so for the of open gains authorities to determining a branch there. and losses and not for what expenditures capital. are See Georator States, E.g., Commissioner, (4th v. United F.2d Allen v. Cir. F.2d denied, (7th 1960); Commissioner, cert. 790-91 Cir. Lutz v. (5th 1960). F.2d Cir. er, possible long (4th 1978) (costs 578 F.2d 520 missioner’s Cir. in- such mandat- term benefits of by curred real estate developer carrying capitalization. ed their commercial land were deductible even though previous experience most of her was applicable Also to the case before us is a development); residential York v. cases, including of one from this cir- series Commissioner, (4th 1958) F.2d 421 Cir. cuit, which have dealt with the costs in- (cost hiring consultant to consider suita- developing curred banks in credit card bility of systems. Security development First Bank of Idaho v. real estate venture Revenue, Internal was deductible for real estate developer). (9th 1979); Moines Cir. Iowa-Des Still another expendi- indication that the of Internal National Bank v. Commissioner tures in question are expenses current rath- Revenue, (8th 1979); 592 F.2d 433 First Cir. er than capital costs legislation is recent National Bank of South Carolina v. United dealing with amortization of certain ex- 1977); 558 F.2d 721 Colora- penses incurred new businesses. A new Springs Bank do National v. United statute, 195, provides IRC § that new busi- The facts nesses apply special amortization generally are the same in each case. The treatment to such if the costs began banks issuing Charge Master or Bank- deductible, have would been directly or Americard credit cards either if paid or incurred in connection with the and, through cooperative organizations, expansion of trade or business process, start-up ex- incurred various (in the same field as the trade or [new] costs, penses computer computer such as ...), business would be allowable as a services, advertising, reports, credit bureau deduction for the taxable in which travel, educational and entertainment ex- paid or incurred. services, penses, temporary clerical all ciation of which it was a member. We held part fee and rado cuit said: factual cases and the instant case is that costs the Lincoln considered test holds whether or not the distinct additional incurred expenses. F.2d at 723. Once of which were claimed as First National Bank of South Carolina, ble. they introduced a more efficient method *7 lenged of They produced nothing corporeal or sala- The startup at 1123. of an assessment the assessment was not a conducting Springs They similarity quoted did In First National Bank of South expanding not decision where the Tenth Cir- are approvingly from the Colo- an old business. 505 F.2d create a expenditures here chal- recurring. between the credit card costs unless asset” test. And & Loan again, by cooperative incurred its costs as a business are not property “separate At the most Carolina, membership persuasive interest. business meet asso- this 558 sion. An statute —“the trade or business.” trary would would obliterate the ket studies and reprinted in itures which would be allowable deductions for an News issue IRC S.R.Rep.No.1036, vey a final reviewing supply, transportation enter that business. These costs include reaching consist of Under an impression accompanied here, are fully of existing existing business, 195(b)(2). potential interpretation by incurred for the render investigatory ^[1980] prospective provision, eligible expansion business As an feasibility studies, 96th decision to markets, Congress U.S.Code 195 explained: reference deductible if incurred Cong., example undergoing expan- facilities, meaningless costs incurred in business of an analysis products, us to the con- Senate is thus under Cong. acquire 2d Sess. point for mar- etc. expenses expend- prior Report or sur- & Ad. as at for labor or to government beyond have benefits the current nation calls our attention to period. See also Malmstedt Commission- several cases which it says have held that incurred in se TV permit

license fees and other costs construction station license, example, curing operating permits type must be treated as which is the of encountered, best, usually license which, upon can which capital expenditures be precedents the government relies. license.8 We amortized over the life of the for several persuasive do not find such cases Still another allowing reason for NCNB First, reasons. of the cases some to treat expansion these costs as current one-year on the rule and held that the based expenses- accounting is that such required is expenses were not deductible because Comptroller Currency. of the In an E.g., beyond year. licenses extended one August 1972 letter to the Assistant Sec- Convoy, Trailer Inc. v. Commis Chandler retary for Tax Policy, Treasury U. De- S. sioner, T.C., 73,285 ¶ P-H at 1322-73 Memo. partment, Comptroller wrote: WBIR, (1974); Inc. v. Radio Station Com long-established It is the policy of this missioner, T.C. require office to National Banks rejection one-year & Loan’s charge operations to current expendi- all rule as determinative such reason renders tures relating to the development and ing unpersuasive. expansion services, of banking including those incurred in credit programs. card rejected Additionally, some of the cases policy This responsibil- has as its basis our the license was for ex- ity assuring of the solvency liquidity pansion already E.g., of an active business. of National Banks and the concurrent Chandler, supra (not expansion an of busi- protection depositories and sharehold- ness for a truck line to seek routes nation- ers. opposed areas); wide as to more limited See First National Bank of WHEC, South Carolina Commissioner, Inc. v. T.C. v. United F.Supp. 1107, (1962) (not expansion an of business for a (D.S.C.1976), aff’d, on the opinion of the radio broadcaster to seek a television license court, district for the previously business was not exist- Normally, recognizes taxpay- IRS ing); WBIR, Radio supra; Station cf. All regular er’s accounting prop- method as the Freight, States Inc. v. United er basis for computing taxes. Section 446 F.Supp. (N.D.Ohio 1947) (taxpayer may of the Internal provides: Revenue Code deduct costs of proceeding contested in ob- Section General Rule for taining operating Methods of license where license not Accounting previously required). contrast, By we have determined, (a) which determination is com- General Rule —Taxable income shall record, pelled by the computed NCNB’s branch- under the method of ing part accounting activities are an established on the its basis of which the tax- regular operations, payer regularly computes thereof. his income in keeping with his books. Furthermore, important it is to note that (b) Exceptions the method used [I]f Comptroller’s —... permission open income, does clearly reflect the com- factually branch bank is different from cer- putation of taxable income shall be made government tain other ap- licenses. The under opinion such method as in the proval, given, only if to “establish and the Secretary clearly does reflect income. operate new . 12 U.S.C. [a] branch[. .].” 36(c). It is not an exclusive taxpayer’s accounting territorial When the method *8 franchise; transferable; it is specified by governmental not and the is one a agency readily regulating taxpayer, Supreme branch bank is the the salable as such. Court has said: A except branch bank has no value its tangible apart and real assets par- from its taxpayer’s generally accepted [WJhere ent as contrasted to the immense value accounting of method of compulsory is made Commissioner, E.g., WHEC, T.C., 73,285 Dustin v. (1973); 8. Inc. v. Memo H Commissioner, Champlin 1972); Coach Lines v. Com- (1962); Radio Sta- 37 821 T.C. missioner, WBIR, Commissioner, (2nd 1943); tion Chan- Inc. v. T.C. Commissioner, Convoy, dler Trailer Inc. v. P-H position. which be agency and that meth- nancial Assets cannot by regulatory the redeemed, all, quickly or even redeemed at income, reflects it is almost clearly od here, such as the items at issue are of little controlling of federal in- presumptively the liquidity benefit to of the bank when consequences. come tax capital carried on its books as a asset. We Co., Power v. Idaho the Comptroller unique position think is in a 94 S.Ct. expertise accurately of to determine what original, quot- footnote (1974) (emphasis in Thus, reflects a bank’s income. we con- Thus, omitted). in the instant ing § clude that NCNB should be entitled to the accounting method case, Comptroller’s the presumption explained the in Idaho Power controlling long it as as presumptively decision. income. accurately reflects repeat We purpose emphasis for the of charging the of is little doubt that There land, building, equipment the and costs expenses repre- to current expansion costs the already of branch banks have been and, accounting policy a conservative sents charged to a account rather than to fact, of certain required differs from that in Also, expenses. current such things so inti- regulated industries.9 federally other mately particular connected with a branch Nevertheless, readily apparent it is to us attorneys’ as fees for examination of the unique industry banking is a and that title to real estate charged also have been Comptroller Currency of the has much the to rather expense. than to daily operations over the of more control studies, money spent obligated or for metro have over most other regulators banks than studies, feasibility applications and control, The basis for this of industries. us, Comptroller Currency, of the it seems to course, overriding public is the interest nothing adds to the value of a bank’s assets stability solvency of the nation’s the which can be so definitely ascertained that What would be rou- financial institutions. capitalized. Certainly “sepa- must be no many other tine ministerial functions rate and distinct additional asset” is creat- permission require express businesses the of ed. While the benefit of all of these classes Comptroller performed by when a na- expenses may of not endure for severely Banks are limited in tional bank.10 year, more than one that is but one factor make, they may of loans amount to considered. The branch has no exist- customers, size of loans to individual separate ence apart parent from the deposits. loans and relationship between bank; bank, readily as a branch it is not Furthermore, unique banks are in that a salable and has no market value other than portion of their assets must be substantial occupies the real estate which it and the cash, available, readily by tangible for claims equipment therein. depositors on demand. To

their insure IV obligations, a bank can meet these it must conclusion, accounting system gives have an which emphasize we that NCNB’s extraordinarily picture operating accurate of its fi- business is a statewide network way policy question treat the It is the of the Interstate Commerce to could far Commission, easily example, require Secretary truck lines more have been settled Treasury capitalize than the fees and other of the courts. franchises, procuring permits, connected with which have term of Among consents and certificates activities of a national bank greater year. than one 49 C.F.R. Part require approval Comptroller which change are: especially name, 30; Account 1321 In this con- change of 12 U.S.C. § nection, caught location, id.; banks, we note that NCNB is in an consolidation of national 33; between two subordinates of the Sec- § U.S.C. conversion from state to na- retary Treasury, bank, 35; the Director of Internal tional § U.S.C. relocation of a Comptroller office, Revenue on the one hand and the 36(e); issuing pre- branch U.S.C. Currency stock, 51a; on the other. Not that NCNB exercising ferred U.S.C. trust better, any disagreement 92a; fare but the powers, would investing 12 U.S.C. *9 proper officials as to the physical premises, between these two 12 U.S.C. 371d. opinion1 coming opposite

of branch banks. In order to maintain this conclusion network, was continually must evaluate erroneous. NCNB position through its market various means First, I altogether unpersuasive find external re- that utilize both internal and determination that an established line of every right keep It sources. has abreast rejected four circuit decisions2 must be on demographic and the like in its trends the basis of a non-specific obiter statement resources as well as allocation of Commissioner v. Lincoln & Loan ascertaining public where the demand for Association, 345, 1893, 403 U.S. regular- its services exists. The bank must (1971).3 holding L.Ed.2d 519 The in Lincoln ly opening take actions such as the and Savings was that the expenditure capi- was closing profit- so maintain of branches as to tal in nature and so “not expense, an let ability position. and a sound financial ordinary expense, alone an deductible under these actions result in the creation Where 162(a).”4 The presence aside that “the separate or retirement of and identifiable of an ensuing benefit that have some buildings equipment, aspect assets such as future is not controlling; many ex- adjustments penses concededly prospec- then the must make deductible have beyond tive benefit year”5 says the taxable to its accounts. But where these nothing expenditures having about what sepa- do create or enhance are, enduring aspects some and what ones assets, they prop- rate and identifiable are not, are Obviously, deductible. erly “ordinary necessary.” considered fought amounts over in Richmond Televi- 162(a). IRC § sion, Darlington-Hartsville and Georator judgment The of the district court is ac- were not “concededly deductible.” cordingly my majority panel opinion pointed I AFFIRMED. simply out that it was not a case for deci- basis, sion on an “all or nothing” but that MURNAGHAN, Judge, Circuit dissent- rather individual attention paid had to be ing: items, the several distinct to determine counsel, reargument Neither nor elo- they whether were and necessary, quence Judge writing Widener for the en deductible, and so expenses, or whether majority panel banc me that convinces should capitalized. Life in excess States, Corporation analysis question begins NCNB v. United 651 F.2d Our of this (4th 1981). principle Cir. of taxation reflected in Section 162(a) of the Internal Revenue Code that an expenditure States, securing Corp. 2. Richmond benefits Television v. United which are real- (4th 1965), ized and exhausted in Cir. vacated on other the same tax 68, 233, fully grounds, period. 382 U.S. deductible in that tax Converse- (1965), original holding ly, expenditure securing beyond on this issue reaf benefits firmed, (4th 1965); Darling capitalized. 354 F.2d 410 Cir. the taxable must be Dar- Bottling lington-Hartsville ton-Hartsville Coca-Cola Co. v. Coca-Cola Bot. v. Unit- Co. States, 1968), States, (4 1968); 393 F.2d 494 Cir. cert. de ed 393 F.2d 494 Cir. Rich- nied, 962, 402, Corporation 393 U.S. 89 S.Ct. 21 L.Ed.2d 376 mond Television v. United (1968); (4 Georator v. United denied, cert. 417 U.S. 94 S.Ct. 41 L.Ed.2d 665 ... It is also clear that Section 263 of the Code, U.S.C. which disallows de- cases, ductions for 3. The decision in one of the three which increase the Geora- any property, Corp., provide value of tor was handed down does not well after opinion complete promulgated. in Lincoln was exhaustive list of nondeductible distinguished expenditures. panel Corp., in Georator con- Commissioner v. Lincoln Sav- sisting (now ings Assn., Judge Judge) Chief Winter and & Loan 403 U.S. 91 S.Ct. Judges Field, fully Butzner and aware of Savings, yet perceived consequence no 4. 403 U.S. at Judge S.Ct. at 1899. purports such as Widener now to derive pages from that case. At 284-85 of 485 F.2d following appears: Id. *10 year one prominent, penditures remains a indeed a amortizable at taxpayer’s predominant, characteristic of a election had to be such paid as “if or in- item, though something even other than curred in connection with the expansion of may prove controlling duration of existence existing an trade or business ... would be specified some circumstances —not allowable as a deduction for the taxable Savings, manifestly excep- year in which paid or incurred.” 26 U.S.C. tions rather than the rule. 195(b)(2) (emphasis § supplied).

Second, wryly I view somewhat the con- It requires giant, unjustified leap, trolling weight en accorded banc to derive from justification set out in majority justification language to set forth the legislative history any support for the legislative history of the new Inter- proposition that all investigatory costs are nal Revenue Code S.Rep. Section See automatically deductible, irrespective of No.1036, Cong., reprinted 96th 2d length Sess. Eligible of life. expenses under IRC ^[1980] U.S.Code Cong. & Ad.News § 195 include “investigatory costs incurred designed 7301. The section was to benefit in reviewing prospective prior business to taxpayers by permitting them to elect reaching to a final decision to acquire or to amortize, over a no shorter than five enter that S.Rep.No.1036, business.” supra, otherwise, years, expenditures which inso- at 7301. But that only is one qualifi- of the far as the characteristics with which we are addition, cations. In to qualify eligi- as an matter, here concerned would recognized expense, ble an expenditure “must be one as deductible. The nature expendi- of the which would be allowable as a deduction for planning costs—were like those with year taxable paid which it is or tures — which we are here confronted, except that paid incurred if it were or incurred in con- they start-up involved expenditures expansion nection with the an new, rather than for existing businesses. trade or business.” Id.

The nondeductibility perceived requir- Thus, the legislative history pur- does not ing amelioration when IRC port was say § that all investigatory costs are passed length arose not from the of life of deductible. To the contrary, explicitly expenditure, but from the non-business application limits its solely to those investi- expenditures paid nature of or incurred be- gatory costs which are deductible in nature. fore a new began operation. business The implication inescapable there expenditures Those were nondeductible are other investigatory costs which are not spans whether their life were ten days deductible, or i.e. are capitalized. to be Conse- years. S.Rep.No. ten supra, at 7300. quently, brought we are straight back to the question we started with: In the case of concerned, Insofar as IRC 195 is it is expenditure, each deductible, was it capi- or observe, outset, relevant to at the that am- Hence, talizable? I submit that the author- way, ortization is a purposes, for tax to deal ity relied on is illusory supportive and not items, not customarily way conclusion reached the en banc deal with items of majority. expense. The statute thus focuses on broadening of category of capital ex- To sum it up, all we have here a case penditure, not on an of the de- where an opportunity to resort gold- category. My panel ductible opinion called en ignored. mean is Start-up expenditures for determinations to be made as to wheth- and other like start-up ex- qualifying er for immedi- penditures except they concern exist- amortizable, ate deduction 100% should be ing businesses often have multi-year lives and, so, if over what duration applications. of time. or such cases should qualifying Such items not for 100%deducti- not be immediately fully deductible in the bility status under law extant when IRC paid or incurred as ordinary and neces- adopted explicitly 195 was sary expenses. not the Rather they should be capi- of, subject affected by, IRC 195. Ex- talized prorated. say That is to *11 should, time, ductibility of all they expenditures specific over be deductible for of a once, at purposes, class,, income tax but not all they may however in nature swoop. be, one fell eminently practi- will result. Taxes are cal, slogan, of course. theOn basis of that Apparently Congress, recently enact- uphold we enactments whose fairness seems ing complete decided that IRC 195 first § us, suspect Congress to if we are sure any deductibility denial of was unfair and apparent meant unfairness. See existing unwise and that law to effect v. F.Supp. Struthers Second, changed. Congress evi- should be (D.Minn.1977); Commissioner of Inter- that, as a matter of eco- dently appreciated Caulkins, nal Revenue v. fact, enterprise nomic a new often must Here, however, legisla- outset, loss, perhaps at the at a operate, tive enactment of IRC 195 does not di- § years. Congress of several over rectly relate to the expendi- tax status of presumably appreciated that a new business existing tures for businesses at all. The altogether evapo- could well see the losses legislative read, history, properly way in no deductions, rate as because there had been compels large, the erection of a unreason- profit against apply no which to them. able inherently preference. and unfair tax a state of affairs would be inconsist- Such taxpayers capitalize Other must and not congressional with a to ent desire encour- expenditures having deduct all at once ex- age formation of new businesses and the applications. tended lives or The probable resulting employment. increase in here, others, banks, preeminently and who So election amortize was extended to will benefit from the decision of the en taxpayers permit por- them to take some early year expenditures majority, banc can no tions of as deduc- means merit de- later, profitable, scription probably “economically deprived.” tions more as The years. heaped upon benefit them further contrib- utes to the description deserved of our in- Congress by enacting IRC 195 thus system disgrace. come tax as a only emphasized capital, the nature as rath- ordinary er than as I dissent. expanses, exploratory expenditures category. congressional therefore, legislation, with, fully strongly supports consistent my panel

the result reached in majority

opinion. simply justification There is no for

reading legislative history making as

more deductible than explorato- theretofore

ry expenditures existing for businesses. To

the extent such had been rec- America, Appellee, UNITED STATES of ognized having the character of necessary expenses (primarily short life Stephen WILLIAMS, Appellant. Jerome deductible, span) they should remain counterparts among expenditures their for No. 81-5151. businesses, 195, made, new IRC are Appeals, United States Court of election, taxpayer’s amortizable. To Fourth Circuit. extent busi- life, longer nesses have characteristics of Argued Jan. they capitalizable. will remain That is all July Decided justification IRC 195 and its lan- guage say. That is all that should be

deemed to mean.

Otherwise, constituting a result a sub- tax

stantial windfall —the immediate de-