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than not a capital expenditure rather than a deductible expense.3
Frederick Weisman Co. v. Commissioner, 97 T.C. 563 (1991);
Atzingen-Whitehouse Dairy, Inc. v. Commissioner, 36 T.C. 173, 183
(1961). Whether a corporation’s redemption of its stock may
constitute an ordinary and necessary business expense under
section 162 has been considered frequently before. The relevant
cases generally begin their analysis with the oft-quoted
principle of United States v. Gilmore, 372 U.S. 39 (1963).
There, the Supreme Court held that the expense of defending a
divorce suit was a nondeductible personal expense, even though
the outcome of the divorce would affect the taxpayer’s holdings
of income-producing property and might affect his business
reputation. The Court explained:
3 In the Tax Reform Act of 1986 (TRA 1986), Pub. L. 99-514,
sec. 613, 100 Stat. 2251, Congress added a new sec. 162(l) to
prohibit deductions otherwise allowable for payments paid or
incurred to redeem corporate stock. The Senate Finance Committee
explained in its report that the new provision “denies a
deduction for any amount paid or incurred by a corporation in
connection with the redemption of its stock.” S. Rept. 99-313,
at 233 (1986), 1986-3 (Vol. 3) 1, 223. Sec. 162(l) was
redesignated sec. 162(k) by the Technical and Miscellaneous
Revenue Act of 1988, Pub. L. 100-647, sec. 3011(b)(3)(A), 102
Stat. 3342, 3625. Sec. 162(k) applies only to payments made
after Feb. 28, 1986. We have observed that Congress made it
clear that in adding what is now sec. 162(k), it intended no
inference as to the deductibility of such payments under
preexisting law. Fort Howard Corp. v. Commissioner, 103 T.C.
345, 357 n. 20 (1994); Frederick Weisman Co. v. Commissioner, 97
T.C. 563, 574 (1991) (citing, inter alia, H. Conf. Rept. 99-841
(Vol. II), at II-169 (1986), 1986-3 C.B. (Vol. 4) 1, 169).
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