Lykes Energy, Inc. and Subsidiaries - Page 12

                                       - 12 -                                         

          the related income is recognized.  See Newark Morning Ledger Co.            
          v. United States, 507 U.S. 546, 565 (1993); INDOPCO, Inc. v.                
          Commissioner, supra at 84; Hertz Corp. v. United States, 364 U.S.           
          122, 126 (1960); Liddle v. Commissioner, 103 T.C. 285, 289                  
          (1994), affd. 65 F.3d 329 (3d Cir. 1995); Simon v. Commissioner,            
          103 T.C. 247, 253 (1994), affd. 68 F.3d 41 (2d Cir. 1995).                  
               Our resolution of this issue turns on whether the FEECA                
          expenses were "ordinary".  The subsidies were.  People's                    
          benefited from them currently in that they induced customers to             
          purchase products from People's.  Of course, People's sales may             
          yield future benefits, such as repeat business and sales of                 
          related products or commodities.  Those future benefits, however,           
          are incidental to the sales at hand.                                        
               We considered a similar issue in Fall River Gas Appliance              
          Co. v. Commissioner, 42 T.C. 850 (1964), affd. 349 F.2d 515 (1st            
          Cir. 1965).  There, the taxpayers were a gas company and its                
          subsidiary; the subsidiary sold and leased gas appliances.  We              
          held that the selling expenses related to the leased appliances             
          must be capitalized.  We held that the selling expenses related             
          to the appliance sales were deductible.  As to the latter class,            
          we noted that the expenses "were related to closed transactions             
          and were a proper charge at once against the income realized from           
          such transactions." Id. at 856.  The same rationale applies here            
          to the subsidies.  People's paid the subsidies to purchasers of             

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  Next

Last modified: May 25, 2011