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statement described as a "protective disclosure statement" to
satisfy section 6662(d)(2)(B),4 which stated:
The taxpayer has deducted certain legal and professional
fees as ordinary and necessary business expenses under
section 162 of the Internal Revenue Code. The amount of the
expenses deducted was $658,000. In INDOPCO, Inc. v.
Commissioner, (112 S.Ct. 1039 (1992), aff'g National Starch
& Chem. Corp. v. Commissioner, 918 F.2d 426 (3d Cir. 1990)),
the Supreme Court held that a corporation must capitalize
expenses resulting in future long-term benefits. The
taxpayer believes that the facts and circumstances with
respect to the deducted amounts are distinguishable from
those in INDOPCO.
In the notice of deficiency, respondent disallowed the
$658,000 on the ground that these expenses should be capitalized.
The question as to whether the $658,000 should be
capitalized or allowed as an ordinary and necessary expense
deduction is not directly at issue in these motions. Rather, in
its motions, petitioner contends respondent made no
"determination" of a deficiency with respect to $151,382 of the
$658,000 expenses, and, therefore, this Court has no jurisdiction
with respect to any underpayment attributable to the $151,382.
Alternatively, if the Court has jurisdiction over this portion of
4
Sec. 6662(a) imposes a penalty for any portion of an
underpayment in tax that is attributable to one or more of five
situations described in sec. 6662(b). Under sec. 6662(d)(2)(B),
any underpayment subject to the penalty shall be reduced if it is
attributable to any item as to which the taxpayer had substantial
authority for the treatment of such item on the return, or as to
which "the relevant facts affecting the item's tax treatment are
adequately disclosed in the return or in a statement attached to
the return."
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