- 4 -
section 162(k) applies to the period in which the costs and fees
at issue in this case were paid or incurred and changes the tax
treatment of the costs and fees, other than interest, that
petitioner paid or incurred to borrow funds.3
The Court's opinion filed in August 1994 obviously did not
reflect the Act's amendment of section 162(k) in August 1996.
The parties, therefore, have jointly moved that we reconsider our
opinion concerning section 162(k) and issue a supplemental
opinion applying the 1996 amendment.
We shall grant the joint motion to reconsider. The parties
have agreed to the amount of costs and fees allocable to
indebtedness. We now hold that the expense disallowance rule of
section 162(k), as amended on August 20, 1996, does not preclude
petitioner from taking 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.
2(...continued)
paid (within the meaning of section
561).
(B) Stock of certain regulated
investment companies.--Any amount paid or
incurred in connection with the redemption of
any stock in a regulated investment company
which issues only stock which is redeemable
upon the demand of the shareholder.
3The Act's amendment to sec. 162(k) does not affect the
Court's previous determination with respect to whether $26.2
million of the $40 million fee paid to Morgan Stanley should be
characterized as interest. See Fort Howard Corp. v.
Commissioner, supra at 369-376.
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