Jeffrey A. Glassman and Mary K. Glasman - Page 7

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          retirement benefits.  The administrator's actions prompted Mrs.             
          Glassman to file her claim and formed the basis of her cause of             
          action.                                                                     
               The second step requires us to characterize the transaction            
          that we identified in the first step.  Id. at 678.  Respondent              
          contends that the taxable portion of the income stream from the             
          Hughes Plan is ordinary income.  See secs. 61(a)(11), 72, 402(a);           
          Eatinger v. Commissioner, T.C. Memo. 1990-310.  Indeed,                     
          petitioners consistently reported the taxable portion of all                
          payments from the plan as ordinary income.  We conclude that Mrs.           
          Glassman's claim relates to the calculation of benefits under the           
          Hughes Plan, not to a "capital transaction" (e.g., the                      
          acquisition, disposition, defense, or protection of title to                
          property).  Therefore, petitioners' expenditures are not capital            
          expenditures.  See Dye v. United States, 121 F.3d 1399, 1405                
          (10th Cir. 1997) (stating that expenditures for attorney's fees             
          are not capital expenditures if incurred to secure taxable,                 
          ordinary income); see also Leonard v. Commissioner, 94 F.3d 523,            
          526 (9th Cir. 1996); Parker v. United States, 215 Ct. Cl. 773,              
          573 F.2d 42, 51 (1978); cf. Pierce Estates, Inc. v. Commissioner,           
          3 T.C. 875, 892-893 (1944)(holding that expenditures for                    
          attorney's fees are not capital expenditures where incurred in              
          litigation over the proper method of calculating how much income            







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