when they either: (1) Create or enhance a separate and distinct asset or (2) otherwise generate significant benefits for the taxpayer extending beyond the end of the taxable year.

Respondent makes no assertion that either fee created or enhanced a separate and distinct capital asset. Respondent's sole argument in support of the determination is that the fees generated for Metrobank the proffered benefits listed supra p. 217, which, respondent asserts, are significant longterm benefits to Metrobank. We disagree with respondent that any of these benefits are significant long-term benefits which would require either fee's capitalization. Although the fees may arguably have produced one or more future benefits for Metrobank, none of those benefits, when considered either separately or together, is enough to characterize either fee as a capitalizable expense. Under the requisite test, capitalization is not always required when an incidental future benefit is generated by an expense. See INDOPCO, Inc. v. Commissioner, supra at 87.

We are unable to find as a fact that Metrobank's payment of either fee produced for Metrobank a significant future benefit requiring capitalization. Whether a benefit is significant to the taxpayer who incurs the underlying expense rests on the duration and extent of the benefit, and a future benefit that flows incidentally from an expense may not be significant. See id. at 87-88. We find as a fact that Metrobank's payment of the fees produced for it no significant long-term benefit.

Metrobank did not pay either fee as a condition to obtaining FDIC insurance in the first place. Metrobank always had and, absent a decision by it to the contrary, would always have had FDIC insurance for its deposit liabilities, including those deposit liabilities assumed from Community. Metrobank paid the fees to insure its assumed deposit liabilities with the BIF, the insurance fund in which it was already a participant, rather than with the SAIF, a fund with which it was unaffiliated. Any benefit that Metrobank derived from insuring the assumed deposit liabilities with the BIF, rather than the SAIF, is insignificant when weighed against the primary purpose for the payment of the fees. That purpose, as explained herein, was, in the case of the exit fee, to protect the integrity of the SAIF for the direct benefit of the FDIC and the potential benefit of the SAIF's participants, one of which

was not Metrobank, by imposing upon Metrobank a final premium for the insurance coverage that the assumed deposit liabilities had received while insured by the SAIF before their assumption. The primary purpose of the entrance fee, as also explained herein, was to protect the integrity of the BIF by charging an additional first-year premium for insurance coverage on the assumed deposit liabilities.

It is critical that Metrobank would not have recovered any portion of either fee were it to have severed its relationship with the BIF. Metrobank paid the exit fee to the SAIF as a nonrefundable, final premium for insurance that it had already received. The SAIF had insured the assumed deposit liabilities before the conversion transaction, and Metrobank was not affiliated with the SAIF either before or after the transaction. Metrobank had neither a right nor a chance to recover any of the exit fee following its payment of the fee to the SAIF; SAIF funds were available for use by the FDIC only with respect to SAIF participants. As we view the exit fee in the context of the statutory scheme, we see that the fee serves mainly to compensate the former insurer (in this case, the SAIF) for its future loss of income as to the assumed deposit liabilities, which compensation flowed to the direct benefit of the FDIC and the potential benefit of the former insurance fund's participants. But for the conversion transaction, the former insurer would have received income in the form of the semiannual insurance premiums payable on the deposit liabilities which were the subject of the assumption, and a failing SAIF participant could have had an opportunity to reach that income were the FDIC to have allowed it. Here, the exit fee gave to the SAIF (and to its participants) 0.9 percent of the deposit liabilities assumed by Metrobank, which translates into four to five times the annual assessment which the SAIF would otherwise have received as to those liabilities had they not been assumed by Metrobank.

We view the entrance fee as also paid as a nonrefundable premium for insurance coverage; in contrast with the exit fee, however, we understand the entrance fee to be paid for the current year's insurance. The use and purpose of the entrance fee is diametrically different from that of the exit fee. In addition to the fact that the entrance fee is significantly less than the exit fee, the entrance fee is paid to the fund that insures the deposits of the institution that assumes

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 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 Associa tion, 403 U.S. 345 (1971), in his brief.