- 25 -
to protect the California consumers from anticompetitive
behavior. Until the injunction was lifted, American Stores faced
the possibility of divestiture. Petitioner’s objective in
acquiring Lucky Stores was to achieve future long-term benefits
from the merger of the Alpha Beta chain of stores and Lucky
Stores. These benefits could not be realized if the State of
California’s antitrust suit was successful. Although petitioner
became the owner of Lucky Stores, it was unable to realize the
long-term benefits being sought until the antitrust suit was
resolved.
The origin of the State of California’s antitrust suit was
American Stores’ acquisition of Lucky Stores. The expenditure of
funds to defend against the antitrust litigation conferred long-
term benefits on American Stores. American Stores was not
defending an existing business structure from attack; rather it
was attempting to establish its right to create such a structure.
These benefits are comparable to the benefits that were required
to be capitalized in INDOPCO, Inc. v. Commissioner, 503 U.S. 79
(1992).
We hold that petitioner is not entitled to deduct the legal
fees it incurred in contesting the State of California’s
antitrust suit.
Decision will be
entered under Rule 155.
Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Last modified: May 25, 2011