112 T.C. No. 9
UNITED STATES TAX COURT
NORWEST CORPORATION AND SUBSIDIARIES, SUCCESSOR IN INTEREST TO
DAVENPORT BANK AND TRUST COMPANY AND SUBSIDIARIES, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 25613-95. Filed March 8, 1999.
D and N entered into a transaction that resulted
in N's owning all the stock of an entity of which D was
a part. P concedes that sec. 263(a), I.R.C., requires
that D capitalize the costs that were directly related
to the transaction. P disputes R's determination that
sec. 162(a), I.R.C., does not let D deduct
investigatory and due diligence costs and all of its
officers' salaries. The investigatory costs relate
primarily to services rendered by L, a law firm, before
D agreed to participate in the transaction. D retained
L to investigate whether a reorganization-like
transaction with N would be good for D and its local
community, so that D's management and board could
decide whether D should agree to such a transaction.
The remaining investigatory costs relate to services
performed by L in investigating whether, after the
transaction, N's director and officer liability
coverage would protect D's directors and officers for
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