the deposit liabilities in a conversion transaction. Moreover, the entrance fee is imposed in accordance with an express congressional intent to prevent dilution of the reserves of the current insurer through the addition of unworthy participants which could prove to be financially troubled and cause an undesired depletion of that insurer's resources. See H. Rept. 101-54(I), at 325 (1989). But for the imposition of the entrance fee, the participants in an FDIC fund could deplete the reserves of that fund if the fund became liable for an extraordinary amount of deposit liabilities which had been assumed by the participants in conversion transactions. After a BIF participant assumes the deposit liabilities of a SAIF participant and pays an entrance fee, however, the value of the BIF generally bears the same ratio to the total deposits insured by the BIF (inclusive of the deposits underlying the assumed deposit liabilities) as before the conversion transaction.

We find additional support for our conclusion that Metrobank derived insignificant benefits from its payment of the fees by noting that Metrobank paid both fees incident to its management's decision to assume the deposit liabilities of a failed savings association. Metrobank's management obviously made a business decision to pay the two fees to insure the assumed deposit liabilities with its regular insurer, the BIF; management decided not to forgo the fees, merge under the second exception to the moratorium, and insure the deposit liabilities with the SAIF. The BIF's annual insurance premiums were less expensive than those of the SAIF, and Metrobank, being a participant in the BIF, was obviously more familiar with its requirements. Although respondent observes correctly that Metrobank could have avoided the fees by assuming the deposit liabilities through a merger, Metrobank chose for business reasons not to do so. We decline to second-guess that business judgment. Under the facts herein, the exercise of such a sound and reasonable business practice under which a taxpayer such as Metrobank acts to minimize its recurring operating costs is not a significant future benefit that requires capitalization of the related non-asset-producing expenditures. Cost-saving expenditures such as this, which are incurred in the process of fulfilling an everyday sound and reasonable business practice, as opposed to effecting a change in corporate structure, qualify

for current deductibility under section 162(a). See T.J. Enters., Inc. v. Commissioner, 101 T.C. 581, 589 (1993) ("Expenditures designed to reduce costs are *** generally deductible."), and the cases cited therein. This is especially true where, as is here, the fees relate solely to the optional insurance of a liability and do not relate directly to either a capital asset or to an income-producing activity. Cf. INDOPCO, Inc. v. Commissioner, 503 U.S. at 83-84 (capitalization generally required to match an expense with the income to be generated therefrom).

Respondent analogizes petitioner's payment of the fees with the purchase of a nontransferable membership interest, which, respondent asserts, is a capitalizable expense. According to respondent, Metrobank's membership interest in the BIF entitled it to: (1) A substantial reduction in future depository insurance premiums, (2) the right to insure all of its deposits in a more stable insurance fund, and (3) the need to adhere to only one regulatory scheme. We disagree with respondent's analogy.9 First, as mentioned above, respondent makes no assertion that Metrobank's payment of either fee was related to the purchase of a capital asset.10 Second, Metrobank was already participating in the BIF program before the transaction, and Metrobank could have continued its participation in the BIF program had it not consummated the transaction. Third, new banks are not charged either fee to insure their deposit liabilities with the BIF, nor is either fee imposed when a bank assumes the deposit liabilities of another bank. Fourth, the fees were nonrefundable, and any perceived benefit derived from Metrobank from its payment of the fees would have been extinguished completely had Metrobank terminated its FDIC insurance.

We conclude and hold that the fees are currently deductible. In so concluding, we note that respondent does not argue that the facts at hand are similar to the facts of Commissioner v. Lincoln Sav. & Loan Association, 403 U.S.

9 We recognize that tit. 12 uses the terms "BIF member" and "SAIF member" to refer to the participants of those funds. See, e.g., 12 U.S.C. sec. 1813(d) (1994). We do not understand Congress' use of the word "member" to refer to a membership interest in the funds in the property sense of the word. In fact, respondent has not even made such an argument.

10 In this regard, respondent relies incorrectly on Darlington-Hartsville Coca-Cola Bottling Co. v. United States, 273 F. Supp. 229 (D.S.C. 1967), affd. 393 F.2d 494 (4th Cir. 1968), and Rodeway Inns of Am. v. Commissioner, 63 T.C. 414 (1974), to support his position herein. The taxpayer in each of those cases purchased a capital asset incident to the payment of the expenses in dispute there.

345 (1971).11 Nor do we find that such is the case. Whereas the payments in the Lincoln Savings case served to create or enhance for the taxpayer a separate and distinct asset, to wit, a "distinct and recognized property interest in the Secondary Reserve", id. at 354-355, the payments here did no such thing.

We have considered all arguments of the parties and, to the extent not discussed herein, find those arguments to be irrelevant or without merit. To reflect concessions,

Decision will be entered under Rule 155.

Reviewed by the Court.

WELLS, CHABOT, COHEN, SWIFT, GERBER, COLVIN, FOLEY, VASQUEZ, and THORNTON, JJ., agree with this majority opinion.

SWIFT, J., concurring: I write separately to clarify why I believe the fees paid by Metrobank to the FDIC are currently deductible.

In INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 86-87 (1992), the Supreme Court described two closely related types of costs that are to be capitalized under section 263: (1) Costs incurred in connection with the acquisition, creation, or enhancement of a specific capital asset; and (2) costs that provide significant benefits that accrue to a taxpayer in future years.

Recently, in analyzing costs allegedly incurred in connection with the acquisition or creation of a capital asset, three Courts of Appeals have reversed all or part of recent Tax Court opinions. See Wells Fargo & Co. & Subs. v. Commissioner, 224 F.3d 874 (8th Cir. 2000), affg. in part and revg. in part Norwest Corp. & Subs. v. Commissioner, 112 T.C. 89 (1999); PNC Bancorp, Inc. v. Commissioner, 212 F.3d 822 (3d Cir. 2000), revg. 110 T.C. 349 (1998); A.E. Staley Manufacturing Co. & Subs. v. Commissioner, 119 F.3d 482 (7th Cir. 1997), revg. and remanding 105 T.C. 166 (1995). In these opinions, because of the close relationship of the above types of costs, the Courts of Appeals use language and analyses

11 In fact, respondent does not even mention Commissioner v. Lincoln Sav. & Loan Association, 403 U.S. 345 (1971), in his brief.

that are relevant in the instant case to the issue as to the capitalization of fees paid because they allegedly provided to Metrobank significant future benefits.

In Wells Fargo & Co. & Subs. v. Commissioner, 224 F.3d at 885-887, the Court of Appeals for the Eighth Circuit explained as follows:

it is not proper to decide that a cost must be capitalized solely because the fact finder determines that the cost is "incidentally connected" with a long term benefit. This is supported by both Lincoln Savings and INDOPCO.

* * *

* * * * * * *

The INDOPCO case addressed costs which were directly related to the acquisition, while *** [Wells Fargo] involves costs which were only indirectly related to the acquisition. *** In this case, there is only an indirect relation between the salaries (which originate from the employment relationship) and the acquisition (which provides the long term benefit* * *).

Based on the above analysis of the Court of Appeals for the Eighth Circuit, salary and investigatory costs indirectly relating to the acquisition of a capital asset and indirectly providing the taxpayer with future benefits were not required to be capitalized under INDOPCO because they did not directly provide significant future benefits to the taxpayer. See id. at 889.

In PNC Bancorp, Inc. v. Commissioner, 212 F.3d at 829, involving expenses paid for credit reports, appraisals, and salaries relating to consumer loans, the Court of Appeals for the Third Circuit refused to conclude that

in performing credit checks, appraisals, and other tasks intended to assess the profitability of a loan, the banks "stepped out of [their] normal method of doing business" so as to render the expenditures at issue capital in nature. Encyclopaedia Britannica, Inc. v. Commissioner, 685 F.2d 212, 217 (7th Cir. 1982).

The Court of Appeals for the Third Circuit, in PNC Bancorp, Inc. v. Commissioner, 212 F.3d at 830, continued as follows (quoting from a portion of the taxpayer's brief):

the Tax Court proceeded from the clearly accurate premise that the expenses in question were associated with the loans, incurred in connection with the acquisition of the loans, or "directly related to the creation of the loans," *** to the faulty conclusion that these expenses themselves created the loans. We conclude that the term "create" does not

stretch this far. In Lincoln Savings, it was the payments themselves that formed the corpus of the Secondary Reserve; therefore, it naturally follows that these payments "created" the reserve fund. In * * * [the taxpayer's] case, however, the expenses are merely costs associated with the origination of the loans; the expenses themselves do not become part of the balance of the loan. *** [Citation omitted.]

While purporting to apply the Lincoln Savings language, both the Tax Court and the government effectively have transformed that language, by subtle but significant degrees, from a test based on whether a cost "creates" a separate and distinct asset, into a much more sweeping test

* * * *

In PNC Bancorp, Inc. v. Commissioner, 110 T.C. at 370, we concluded that the costs in issue were "assimilated" into the asset that was acquired. In contrast, the Court of Appeals for the Third Circuit held that the costs reflected "recurring, routine day-to-day business" costs that may be currently deducted as the costs were not incurred for significant future benefits. PNC Bancorp, Inc. v. Commissioner, 212 F.3d at 834. While the benefits from the consumer loans would continue for years, the Court of Appeals for the Third Circuit resolved not to expand the type of costs that must be capitalized "so as to drastically limit what might be considered as 'ordinary and necessary' expenses." Id. at 830.

A.E. Staley Manufacturing Co. & Subs. v. Commissioner, 119 F.3d 482 (7th Cir. 1997), involved fees paid to investment bankers to explore alternative transactions in connection with an unsuccessful defense of a hostile tender offer. In reversing the Tax Court's holding that the fees had to be capitalized, the Court of Appeals for the Seventh Circuit relied on the "well-worn notion" that costs incurred in defending a business are currently deductible. Id. at 487.

As noted in A.E. Staley Manufacturing by the Court of Appeals for the Seventh Circuit, the test to apply under INDOPCO is difficult to articulate and to apply. See id. The test is very factual and practical. In an effort to partially reconcile the various statements of the INDOPCO test and, in particular, in light of the recent Courts of Appeals opinions reversing the Tax Court's application of the INDOPCO test, I offer the following:

Under INDOPCO, direct and indirect (e.g., overhead) costs that are similar to routine expenses incurred by a taxpayer in the ordinary and normal course of its business (e.g., sala