RJR Nabisco Inc. (Formerly R.J. Reynolds Industries, Inc.) and Consolidated Subsidiaries - Page 30

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          that the term “advertising” is a term of art for Federal income             
          tax purposes.  Indeed, respondent implicitly concedes that the              
          rules with respect to advertising govern the deductibility of the           
          litigated expenses, although, under respondent's interpretation             
          of those rules, the litigated expenses are not deductible                   
          business expenses because they are capital expenses.  Moreover,             
          respondent called as an expert witness Mukesh Bajaj, Ph.D.,                 
          senior associate, Business Valuation Services, Inc.  Dr. Bajaj              
          was accepted by the Court as an expert in corporate finance and             
          business valuation, and his written report was received into                
          evidence as his expert testimony.  Dr. Bajaj testified that there           
          is an accepted textbook definition of advertising.5  On cross-              
          examination, he conceded that cigarette package graphic designs             
          qualify as advertising under that definition.  On brief,                    
          respondent agrees that cigarette pack graphic designs fit the               
          textbook definition of advertising.  We are, thus, satisfied                

          4    (...continued)                                                         
          product, convey information, attract attention at point of sale             
          when the retailer displays the pack, and other purposes.”, with             
          (2) “The advertising for a product or group of products serves to           
          convey information, project the image chosen for the positioning            
          of the product or products, attract consumer attention to the               
          product or products, and other purposes.”                                   
          5    Dr. Bajaj testified that the accepted, current textbook                
          definition of advertising is the 1948 definition of the American            
          Marketing Association, which he summarized as follows:  “any paid           
          form of non-personal presentation and promotion of ideas, goods,            
          or services by an identified sponsor, which involves the use of             
          mass media.”  (Emphasis omitted.)                                           





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