Merlin A. and Dee D. Steger - Page 6




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          deductions, may be deducted in the year the taxpayer's business             
          ceases to operate); see generally sec. 336 (corporate taxpayer              
          entitled to recognize loss in the year of liquidation); sec. 195            
          (allowing a taxpayer to deduct the unamortized portion of                   
          deferred startup expenditures for the year in which the trade or            
          business is completely disposed of).  Here, respondent does not             
          contend that the cost of the Policy is not a necessary expense.             
          Rather, respondent contends that the cost of the Policy is not              
          "ordinary" because it is a capital expenditure given its                    
          indefinite useful life.  However, even if we assume that the                
          Policy is a capital asset, petitioners are nevertheless entitled            
          to deduct the cost of the Policy in the year in issue.  The                 
          Policy has no ascertainable useful life but rather is an                    
          intangible asset providing petitioner with malpractice coverage             
          for an indefinite term of years.  Although as a capital asset               
          with an indefinite useful life the Policy would not be currently            
          deductible, it is deductible upon dissolution of petitioner's               
          business.  See INDOPCO, Inc. v. Commissioner, supra at 83-84.               
          Thus, even if the Policy is a capital asset, because petitioner             
          purchased the Policy in the same year that he ceased to operate             
          his business, petitioners are entitled to deduct the cost of the            
          Policy in that year.                                                        
               In contrast, if we assume that the Policy is not a capital             
          asset, then the cost of the Policy would be deductible as an                





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