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On two occasions, we have applied INDOPCO to require
capitalization of acquisition-related expenditures. First, in
Victory Mkts., Inc. & Subs. v. Commissioner, 99 T.C. 648 (1992),
we held that INDOPCO prohibited a taxpayer from currently
deducting expenses for professional services incurred incident to
a takeover that was not hostile. It appears that these expenses
were attributable to an agreement that the taxpayer had with E.F.
Hutton to provide advice and services on the takeover. See id.
at 652. The taxpayer had argued that these expenses were
currently deductible because the takeover was a hostile one from
which it received no long-term benefit. We found that the
takeover was not hostile and that it generated long-term
benefits.
Most recently, in A.E. Staley Manufacturing Co. & Subs. v.
Commissioner, 105 T.C. 166 (1995), revd. and remanded 119 F.3d
482 (7th Cir. 1997), we held that INDOPCO prevented the taxpayer
from currently deducting expenses for investment bankers' fees
and printing costs incurred incident to a takeover. The taxpayer
had argued that these expenses were currently deductible because
the takeover was hostile. We held that the expenses had to be
capitalized because they were incurred incident to the taxpayer's
change of ownership from which it derived significant long-term
benefits. Upon appeal, the Court of Appeals for the Seventh
Circuit disagreed in part. The Court of Appeals held that the
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