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but an expense of Lakeview, we must decide whether such expense
is required to be capitalized. Madden v. Commissioner, 514 F.2d
1149 (9th Cir. 1975); BHA Enters., Inc. v. Commissioner, 74 T.C.
593, 599 (1980). If an expense is capital in nature, a taxpayer
may not deduct it as an ordinary and necessary business expense
under section 162. Sec. 263(a); INDOPCO, Inc. v. Commissioner,
503 U.S. 79, 84 (1992); Woodward v. Commissioner, 397 U.S. 572,
575 (1970); United States v. Hilton Hotels Corp., 397 U.S. 580
(1970). A taxpayer must capitalize costs associated with the
creation of a separate and distinct asset or where the taxpayer
receives more than incidental future benefits as a result of the
expenditure. INDOPCO, Inc. v. Commissioner, supra at 86-87. In
INDOPCO, Inc. v. Commissioner, supra at 84, the Supreme Court
noted that “deductions are exceptions to the norm of
capitalization".
"[S]tock is most naturally viewed as a capital asset,"
Arkansas Best Corp. v. Commissioner, 485 U.S. 212, 222-223
(1988), and legal expenses incurred in the acquisition of a
capital asset must be capitalized. Woodward v. Commissioner,
supra at 576; Third Natl. Bank v. United States, 427 F.2d 343
(6th Cir. 1970). Expenses are incurred in the acquisition of an
asset if "the origin of the claim litigated is in the process of
acquisition itself." Woodward v. Commissioner, supra at 577.
This Court has held that where the circumstances surrounding
the sale of stock (not sold as inventory) are the subject of
litigation that arose subsequent to the transaction, the legal
fees incurred are capital expenditures. Wagner v. Commissioner,
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