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that because the takeover had been hostile, and the bulk of the
fees10 was expended in an effort to thwart it, they produced no
benefit extending beyond the taxable year. According to the
Court of Appeals, the fees were thus more properly viewed as
costs associated with defending a business or existing corporate
policies against attack, which were deductible under section
162(a), rather than as costs associated with facilitating a
capital transaction, required to be capitalized.11
Petitioner contends that we should follow the Court of
Appeals for the Seventh Circuit’s decision and find the legal
expenses at issue herein deductible because they were incurred in
"a defense to an attack on the business" or "to thwart what
amounted to a hostile takeover attempt". However, the instant
case provides no occasion for us to consider whether to adopt the
reasoning of the Court of Appeals decision, because it is readily
distinguishable.
Petitioner's attempt to characterize William's effort to
rescind the Redemption Agreement as a hostile takeover attempt or
an attack on existing business practices is simply unavailing.
The critical difference is that the dispute in this case was over
the terms of a completed capital transaction. The origin of
10 The Court of Appeals concluded that a small portion of
the fees were facilitative of the ownership change and were
therefore required to be capitalized.
11 The Court of Appeals concluded in the alternative that a
significant portion of the costs were deductible under sec.
165(a) as costs associated with abandoned capital transactions,
because they were incurred to develop ultimately unsuccessful
alternatives to the ownership change which occurred.
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