212 F.3d at 835, reflect much of my thinking on the issue before us. I quote a portion thereof:

we find the case before us today to be much farther from the heartland of the traditional capital expenditure (a "permanent improvement or betterment") than are the scenarios at issue in INDOPCO and Lincoln Savings. We will not mechanistically apply phrases from those precedents in ignorance of the realities of the facts before us. We see no principled distinction between the costs at issue here and other costs incurred as "ordinary expenses" by banks. [Id.]

RUWE, J., concurring in part and dissenting in part: I agree with the majority's legal analysis and its application of that analysis to ACC's expenditures for salaries and benefits (hereinafter salaries) that were incurred in connection with the acquisition of installment contracts. The majority correctly holds that the percentage of salaries related to credit analysis activities must be capitalized. However, the majority then holds that "overhead" expenditures need not be capitalized. I disagree with the majority's conclusion that the "overhead" expenses were not directly related to the acquisition of installment contracts because, in my opinion, that conclusion is inconsistent with the majority's specific findings of fact.

The following breakdown of specific expenditures appears on pages 380-381 of the majority's findings of fact:

These expenditures were all incurred in ACC's business. The majority finds that ACC's only business operation was the acquisition of installment contracts and the servicing of those contracts.1 With respect to the salaries and "overhead" expenses found to be related to ACC's credit analysis activities ($267,832 for 1993 and $339,211 for 1994),2 the majority makes the following finding of fact:

In 1993 and 1994, ACC paid installment contracts expenditures totaling $267,832 and $339,211, respectively, * * * which were attributable to ACC's obtaining of credit reports and screening of credit histories, related primarily to the portion of ACC's payroll and overhead expenses that was attributable to its credit analysis activities. None of these expenditures included any postacquisition or servicing expenses.

***

6 We use the term "credit analysis activities" to refer to ACC's credit review services and its funding services (i.e., ACC's issuance of the checks to dealers in consideration for the installment contracts). [Majority op. p. 379; emphasis added.]

From the majority's findings of fact I conclude: (1) ACC'S business operation consisted of the acquisition of installment contracts and the postacquisition servicing of those contracts; and (2) of the total expenses for salaries and overhead for 1993 and 1994, $267,832 for 1993 and $339,211 for 1994 were related to credit analysis activities and were not related to any other business operations of ACC.3 To me, the logical conclusion is that both salaries and overhead expenses, totaling $267,832 for 1993 and $339,211 for 1994, were exclusively for ACC's acquisition of installment contracts and thus were "directly" related to the acquisition of installment contracts.

The percentage of ACC's salaries and "overhead" expenses that related exclusively to ACC's credit analysis activities indicates that most of ACC's business activity concerned the acquisition of installment contracts. For example, 76 percent of salaries and 68 percent of "overhead" expenses for 1993 were related to ACC's credit analysis activities. For 1994, the percentages were 65 percent and 71 percent, respectively.

1 The majority finds: "Its sole business operation is (1) the acquisition of installment contracts from automobile dealers * * * and (2) the servicing of those contracts." Majority op. p. 376. 2 The parties agree with the allocations in the above table.

3 The majority finds that "None of these expenditures included any postacquisition or servicing expenses." Majority op. p. 379. ACC's only business operation was the acquiring of installment contracts and the postacquisition servicing of those installment contracts.

The majority finds that "Each of the employees spent a significant portion of his or her time working on credit analysis activities *** and, but for ACC's anticipated acquisition of installment contracts, ACC would not have incurred the salaries and benefits attributable to those activities." Majority op. p. 391. Absent evidence to the contrary, it would seem to follow logically that if ACC's business operation had not included credit analysis activities, ACC would never have incurred the overhead expenses attributable to those activities.

The majority correctly states that the "overhead" expenses would be capital in nature if they "originated" in ACC's process of acquiring installment contracts. Majority op. p. 392. However, the majority reasons that the "overhead" expenses were not directly related to the acquisition of installment contracts because:

None of these routine and recurring expenses originated in the process of ACC's acquisition of installment contracts, nor, in fact, in any anticipated acquisition at all. ACC would have continued to incur most of these expenses in the ordinary course of its business had its business only been to service the installment contracts. * * * [Id.]

There is nothing in the majority's specific findings of fact to support the conclusion that overhead expenses related to credit analysis activities did not "originate" in the process of ACC's acquisition of installment contracts.4 Indeed, it would be logical to conclude that the type and amount of these "overhead" expenses did "originate" in ACC's acquisition of installment contracts. After all, this activity was ACC's dominant activity. If ACC had never engaged in acquiring installment contracts, most of its expenditures for both salaries and overhead expenses would have been unnecessary in the first place.

The majority reasons that rent and utilities were "generally fixed charges which had no meaningful relation to the number of credit applications analyzed (or the number of installment contracts acquired) by ACC." Majority op. p. 392. Again, with the possible exception of rent,5 there are no specific findings of fact to support this rationale. Logic would

4 It should be noted in this regard that petitioners bear "the burden of clearly showing the right to the claimed deduction". INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992).

5 The majority finds that ACC had a 5-year lease that began in October 1992. There is no discussion of the specific terms of the lease other than the amount of monthly rent.