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to this theory, petitioners contend that Mrs. Glassman's interest
is a capital asset that Mrs. Glassman sold to the Hughes Plan in
exchange for 60 monthly payments and that her basis offset funds
she received from the plan. For the reasons set forth below we
conclude that the payments are not capital expenditures.
Generally, expenses must be capitalized if they are paid to
acquire, dispose, defend, perfect title to, or improve property.
Sec. 263(a); sec. 1.212-1(k), Income Tax Regs. Petitioners
contend that, under the origin of the claim test, their payments
are capital expenditures. Because this case is appealable to the
Court of Appeals for the Ninth Circuit, we must apply the Ninth
Circuit's version of the origin of the claim test. Golsen v.
Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 955 (10th Cir.
1971). In Keller St. Dev. Co. v. Commissioner, 688 F.2d 675, 678
(9th Cir. 1982), affg. T.C. Memo. 1978-350, the Court of Appeals
for the Ninth Circuit stated that the origin of the claim test is
a 2-step process. Cf. Boagni v. Commissioner, 59 T.C. 708 (1973)
(applying a list of factors).
The first step requires us to identify the transaction or
event from which the claim originated (i.e., the event that
prompted the cause of action and formed the basis of the suit).
Keller St. Dev. Co. v. Commissioner, supra at 681. Mrs.
Glassman's claim against the Hughes Plan originated from the
administrator's calculation and payment of her community share of
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