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Thereafter, the Supreme Court applied the origin of the
claim test of United States v. Gilmore, supra, to two companion
cases in which the issue was whether expenses were ordinary or
capital. See United States v. Hilton Hotels Corp., 397 U.S. 580
(1970); Woodward v. Commissioner, 397 U.S. 572 (1970). Both
cases involved the deductibility of a corporation’s costs
incurred incident to the appraisal and acquisition of dissenters’
stock. The Court rejected the corporations’ claims that the
costs were deductible because their “primary purpose” did not
directly involve the acquisition of stock. In the Woodward case,
the Court explained that “A test based upon the taxpayer’s
‘purpose’ in undertaking or defending a particular piece of
litigation would encourage resort to formalisms and artificial
distinctions.” The Court rejected the primary purpose test as
“uncertain and difficult” and directed that the issue of whether
an expense is ordinary or capital be controlled by the “simpler
inquiry whether the origin of the claim litigated is in the
process of acquisition itself.” Woodward v. Commissioner, supra
at 577.
A few years after the Woodward and Hilton cases, we applied
the origin of the claim test to a corporation’s claimed deduction
of amounts it paid to redeem the shares of a minority
shareholder. In Harder Servs., Inc. v. Commissioner, 67 T.C.
585, 596 (1976), affd. without published opinion 573 F.2d 1290
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