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It is a widely accepted general principle that a taxpayer should capitalize an expenditure that produces a benefit lasting beyond the current tax period. Yet rules putting this principle into practice are among the most controversial in all of federal income taxation. Many argue that a retreat from the general principle is warranted when designing capitalization rules, and even those who argue that capitalization rules ought to be sweeping usually conclude that exceptions are necessary or desirable. For instance, most commentators accept uncritically that expenses incurred to procure certain intangible capital should be expensed, as under current law, without exploring whether expensing of intangibles costs is inevitable, although some have considered the implications of excepting intangibles costs from capitalization. Although the arguments with respect to exceptions to capitalization for tangible assets have received more attention, no consensus view has emerged regarding whether many of the exceptions are desirable as a matter of policy. This Article is a systematic analysis of the arguments in favor of departing from the normative or first-best capitalization rule.

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57 Tax L. Rev. 549-606 (2004)