acquired from Community. See Brief for Petitioner at 24-25.5 Finally, respondent's long-term benefit argument sufficiently raised the issue whether the fees were part of the cost of acquiring capital assets, as I explained supra pp. 249-250.

Treating the Fees as Insurance Premiums Is Also
Insufficient

Even if I accepted the majority's invitation to defer consideration of the asset acquisition "theory" to another day, I would still conclude that the fees must be capitalized. The majority assert that deduction is proper because any longterm benefit to Metrobank "is insignificant when weighed against the primary purpose for the payment of the fees." Majority op. p. 222. According to the majority, that primary purpose was to "protect the integrity" of the SAIF and the BIF. Id. The majority additionally assert that "Metrobank paid the exit fee to the SAIF as a nonrefundable, final premium for insurance that it had already received", while the entrance fee was a nonrefundable premium "for the current year's insurance." Majority op. p. 223. Once again, I disagree.

The majority's conclusion that Metrobank paid the exit fee for insurance it had already received is clearly wrong. As the majority opinion clearly states, the exit fee was paid to the SAIF. See id. The deposits of Community acquired by Metrobank were insured by the SAIF only when they were Community's deposits; those deposits became insured by the BIF upon their acquisition by Metrobank.

Therefore, if the exit fees accurately can be described as premiums for SAIF insurance, they were for insurance coverage the deposits received before Metrobank acquired them. The only business purpose Metrobank could have had for paying this "SAIF insurance expense" was its desire to acquire Community's assets and deposits.

There is no occasion in the case at hand to consider petitioner's alternative argument that, if the fees are capitalizable, petitioner is entitled to amortize them over a 10-year period; there is no evidence of useful life in the stipulated record. It does seem to me that amortization should probably be allowed over such useful life of the core deposits acquired as could be shown. See Citizens & S. Corp. v. Commissioner, 91 T.C. 463 (1988), affd. without published opinion 900 F.2d 266 (11th Cir. 1990); see also First Chicago Corp. v. Commissioner, T.C. Memo. 1994-300; Trustmark Corp. v. Commissioner, T.C. Memo. 1994-184. Compare Field Serv. Adv. Mem. 200008-005 (Feb. 25, 2000), where, in a transaction similar to the case at hand, the taxpayer amortized the entrance and exit fees over a 10-year period for financial statement purposes.

The majority's reliance on the role the fees played in protecting the "integrity" of the SAIF is misplaced. While it may have been the FDIC's purpose in imposing the exit fees, it certainly wasn't Metrobank's reason for paying them. Moreover, the FDIC's purpose is of limited relevance to the case at hand. See Commissioner v. Lincoln Sav. & Loan Association, 403 U.S. 345, 354 (1971) (“It is not enough, in order that an expenditure qualify as an income tax deduction *** that it serves to fortify FSLIC'S [the predecessor of SAIF] insurance purpose and operation").

What all this means is that, even if the majority's characterization of the fees as insurance premiums is correct, the fees nevertheless must be capitalized. As I've already explained, ordinarily deductible expenditures must be capitalized when they are incurred in connection with the acquisition of a capital asset. More generally, however, insurance premiums that give rise to benefits extending beyond the end of the taxable year must be capitalized, even if they are not connected with the acquisition of a capital asset. See Lincoln Sav. & Loan Association v. Commissioner, 51 T.C. 82, 94 (1968) (citing "long line of decisions by this Court holding that prepaid insurance premiums are capital expenditures to be expensed over the years in which coverage is actually obtained"), revd. 422 F.2d 90 (9th Cir. 1970), revd. 403 U.S. 345 (1971); sec. 1.461-4(g)(8) Example (6), Income Tax Regs. (where taxpayer pays premium in 1993 for insurance contract covering claims made through 1997, period for which premium is permitted to be taken into account is determined under the capitalization rules, because the contract is an asset having a useful life extending substantially beyond the close of the taxable year).

The entrance and exit fees were in addition to the semiannual premiums Metrobank paid to the BIF to insure the acquired deposits after the acquisition. The fees were also several times greater than the semiannual premiums, as a percentage of the acquired deposits. See majority op. pp. 214-215, 223-224.6 The exit and entrance fees therefore

6 The third of the emphasized points in Judge Swift's concurrence (Swift, J., concurring op. pp. 229-230) compares the entrance and exit fees paid by Metrocorp to acquire the deposits of Community with the regular semiannual premiums paid by Metrocorp on its total deposits, including both its own deposits and the deposits of Community that it acquired. Obviously, the ratio of the entrance and exit fees to the regular semiannual premiums would be much higher Continued

resemble premium prepayments, which entitled Metrobank to insure the acquired deposits with the BIF in future years. This would support capitalizing the exit and entrance fees, even if they had no connection with the acquisition of a separate asset. See Herman v. Commissioner, 84 T.C. 120 (1985) (one-time purchase of subordinated loan certificate, which entitled physician, upon payment of annual premiums, to malpractice insurance coverage, held capital investment; Commissioner conceded deductibility of annual premiums).

The Cost Savings Argument Is Not Persuasive

The majority's final argument for deductibility is that cost savings expenditures, such as payments to escape from burdensome or onerous contracts, are generally deductible. See majority op. pp. 224-225. This principle may have been limited by the Supreme Court's opinion in INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 88–89 (1992) (identifying benefits of transformation from public to private company, such as avoidance of shareholder-relations expenses and administrative advantages of reducing the number of classes and shares of outstanding stock). Moreover, the majority's cost reduction analysis is defective; the case relied upon by the majority, T.J. Enters., Inc. v. Commissioner, 101 T.C. 581 (1993), is distinguishable. The payments in that case were made each year to reduce costs that otherwise would have been payable during each such year; the Court also noted that no separate and distinct additional asset was acquired by virtue of the payments sought to be deducted. See T.J. Enters., Inc. v. Commissioner, supra at 589 n.8, 592-593. By contrast, the fees in the case at hand entitled Metrobank to insure the acquired deposits with the BIF for many years to come (and, as noted above, the fees were connected with the acquisition itself).

Finally, we have held that a payment to terminate a burdensome contract may be capitalized if the payment is also integrally related to the acquisition of a new long-term contract with significant future benefits. See U.S. Bancorp & Consol. Subs. v. Commissioner, 111 T.C. 231 (1998). Even if one were to agree with the majority that the entrance and

if the regular premiums paid by Metrocorp on its own deposits were removed from consideration. They should be so removed if the much more meaningful comparison of the entrance and exit fees with the regular premiums on the acquired deposits is to be made.

exit fees were paid in order to terminate burdensome insurance premium obligations, the entrance and exit fees would still fall within the rubric of long-term benefits.

For all the foregoing reasons, I respectfully dissent.

RUWE, WHALEN, and GALE, JJ., agree with this dissenting opinion.

JAMES R. KENNEDY, PETITIONER v. COMMISSIONER

OF INTERNAL REVENUE, RESPONDENT

Docket No. 9544-00L.

Filed April 23, 2001.

On Sept. 10, 1999, R mailed to P a notice required by sec. 6320(a), I.R.C., concerning P's unpaid tax liabilities for the years 1984 through 1988. R concedes that such notice was not mailed to P at his last known address. On Oct. 25, 1999, R mailed to P a final notice of intent to levy concerning P's unpaid tax liabilities for the years 1984 through 1988. Although the notice of intent to levy was mailed to P at his last known address, P failed to file a request for an administrative hearing with the Internal Revenue Service Office of Appeals (Appeals Office) within the 30-day period prescribed in sec. 6330, I.R.C. Despite P's failure to file a timely request for an Appeals Office hearing, R granted P a so-called equivalent hearing. On Aug. 17, 2000, R issued a "decision letter" to P stating that R would proceed with collection by way of levy. On Sept. 11, 2000, P filed a petition for review with the Court. Held, insofar as the petition filed herein purports to be a petition for review of a notice of the filing of a notice of lien pursuant to sec. 6320, I.R.C., the Court lacks jurisdiction on the ground that R did not make a determination pursuant to that section because R failed to send the written notice prescribed by sec. 6320(a), I.R.C., to P at his last known address. Held, further, insofar as the petition filed herein purports to be a petition for review of a notice of intent to levy pursuant to sec. 6330(d), I.R.C., the Court lacks jurisdiction on the ground that R did not make a determination pursuant to sec. 6330, I.R.C., because P failed to file a timely request for an Appeals Office hearing under sec. 6330(a)(2) and (3)(B) and (b), I.R.C. Held, further, R's decision to conduct a so-called equivalent hearing did not result in a waiver by R of the time restrictions imposed on P for requesting an Appeals Office hearing pursuant to sec. 6330, I.R.C.

James R. Kennedy, pro se.

Susan Watson and Wendy S. Harris, for respondent.

OPINION

RUWE, Judge: This case was assigned to Special Trial Judge Robert N. Armen, Jr., pursuant to the provisions of section 7443A(b)(4) and Rules 180, 181, and 183.1 The Court agrees with and adopts the Opinion of the Special Trial Judge, which is set forth below.

OPINION OF THE SPECIAL TRIAL JUDGE

ARMEN, Special Trial Judge: This matter is before the Court on respondent's motion to dismiss for lack of jurisdiction. Respondent contends that the Court lacks jurisdiction over the petition on the ground that respondent did not issue a determination letter to petitioner pursuant to section 6320 or 6330. As explained in detail below, insofar as petitioner seeks review of a notice of the filing of a notice of lien pursuant to section 6320, we will dismiss this case for lack of jurisdiction on the ground that respondent failed to mail the notice required by section 6320(a) to petitioner at his last known address and, therefore, petitioner had no opportunity to request an administrative hearing. Further, insofar as petitioner seeks review of a notice of intent to levy pursuant to section 6330, we will dismiss this case for lack of jurisdiction on the ground that petitioner failed to make a timely request for an administrative hearing and, therefore, respondent was not obliged to (and did not) issue a determination letter to petitioner.

Background

On or about September 10, 1999, respondent mailed to petitioner a Notice Of Federal Tax Lien Filing And Your Right To A Hearing Under IRC 6320 (the notice required by section 6320(a)) concerning petitioner's unpaid tax liabilities for the years 1984 through 1988.2 Respondent concedes that the notice required by section 6320(a) was not mailed to petitioner at his last known address and that such notice was. therefore invalid. See sec. 6320(a)(2)(C). In any event, petitioner did not request an administrative hearing with the

1 Unless otherwise indicated, all section references are to the Internal Revenue Code, as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure.

2 The notice required by sec. 6320(a) listed petitioner's tax liabilities as $19,372.79, $715.29, $15,010, $1,618.23, and $2,189.94 for the years 1984, 1985, 1986, 1987, and 1988, respectively.