FMR Corp. and Subsidiaries - Page 2

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               Leslie J. Schneider, Patrick J. Smith, Frederic G. Corneel,            
          and Kenneth J. Seaman, for petitioner.                                      
               Steven R. Winningham, Martin L. Shindler, Marvis A. Knospe,            
          and Tyrone J. Montague, for respondent.                                     


               RUWE, Judge:  Respondent determined deficiencies in                    
          petitioner's Federal income taxes as follows:                               
                         Year                Deficiency                               
                         1985                 1$111,905                               
                         1986                534,142                                  
                         1987                99,042                                   

               1Respondent was granted leave to amend the answer, asserting           
          that petitioner is liable for an increased deficiency for 1985 in           
          the amount of $48,156.  Thus, the total deficiency determined by            
          respondent for 1985 is $160,061.                                            

               The issues for decision are:  (1) Whether the costs                    
          petitioner incurred in starting new regulated investment                    
          companies during the years in issue are deductible as ordinary              
          and necessary business expenses under section 1621 or must be               
          capitalized; and (2) if the costs are capital expenditures,                 
          whether petitioner is entitled to deduct an amortized portion of            
          such costs under section 167.                                               



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




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