Fort Howard Corporation and Subsudiaries - Page 2

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               deductions for the amount of costs and fees it paid or                 
               incurred that are properly allocable to indebtedness                   
               and amortized over the term of such indebtedness.                      

                James L. Malone III, Kristen E. Hazel, and Lonn W. Myers,             
          for petitioner.                                                             
               Lawrence C. Letkewicz, William E. Bogner, and Dana E.P.                
          Hundrieser, for respondent.                                                 

                                SUPPLEMENTAL OPINION                                  

               RUWE, Judge:  On August 24, 1994, we issued an opinion that            
          resolved some, but not all, of the issues in this case.  Fort               
          Howard Corp. v. Commissioner, 103 T.C. 345 (1994).  The parties             
          have now settled the remaining issues.                                      
               One of the issues resolved in our prior opinion was whether            
          section 162(k)1 precluded petitioner from deducting or amortizing           
          the costs and fees, other than interest, that petitioner paid in            
          1988 to borrow funds used in the leveraged buyout (LBO) of its              
          stock.  We held that such costs and fees were paid or incurred              
          "in connection with" a redemption and that section 162(k)                   
          precluded petitioner from deducting or amortizing them for                  
          purposes of computing its taxable income.                                   




               1Unless otherwise indicated, all section references are to             
          the Internal Revenue Code in effect for the year in issue, and              
          all Rule references are to the Tax Court Rules of Practice and              
          Procedure.                                                                  




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