- 27 -
Petitioner, again relying on A.E. Staley Manufacturing Co.
v. Commissioner, 119 F.3d 482 (7th Cir. 1997), revg. 105 T.C. 166
(1995), and Federated Dept. Stores, Inc. v. Commissioner, 171
Bankr. 603 (S.D. Ohio 1994), affg. In re Federated Dept. Stores,
Inc., 135 Bankr. 950 (S.D. Ohio 1992), argues that the legal fees
were incurred to avoid a hostile takeover attempt by William and
are thus deductible under section 162(a) as ordinary and
necessary business expenses under the reasoning of those cases.
In A.E. Staley Manufacturing Co. v. Commissioner, supra, the
Court of Appeals for the Seventh Circuit reversed our decision,
in which we held that certain investment banking fees had to be
capitalized because incurred in connection with a change in
corporate ownership that produced benefits for the corporate
taxpayer extending beyond the taxable year. In reaching that
result, we reasoned that it did not matter whether the change in
ownership occurred as a result of a "hostile" or "friendly"
takeover. Id. at 198. The Court of Appeals disagreed, reasoning
9(...continued)
estate, also a capital asset.
We also have no basis in the record on which to determine
the amount of legal fees allocable to William’s other peripheral
claims, such as intentional infliction of emotional distress.
Faced with the absence of any evidentiary basis on which to
attribute fees to any particular claim, we are unable to allocate
the legal fees between deductible and capital expenses and hold
that they are, in the aggregate, capital. See Cohan v.
Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930), affg. in part
and remanding in part 11 B.T.A. 743 (1928); Vanicek v.
Commissioner, 85 T.C. 731, 743 (1985); Churchill Farms, Inc. v.
Commissioner, T.C. Memo. 1969-192, affd. sub nom. Bayou Verret
Land Co. v. Commissioner, 450 F.2d 850 (5th Cir. 1971).
Page: Previous 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 NextLast modified: May 25, 2011