- 2 -
COHEN, Judge: Respondent determined deficiencies of
$2,370,750 and $818,812, respectively, in petitioner’s
consolidated Federal income tax for 1992 and 1993.
After concessions, the issue for decision is whether
$6,956,590 of a payment made by petitioner in satisfaction of a
court judgment, based on a patent infringement claim that was
brought against the acquired corporation and assumed as a
contingent liability by petitioner, should be capitalized as a
cost of acquisition or deducted as a business expense. Unless
otherwise indicated, all section references are to the Internal
Revenue Code in effect for the years in issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Illinois Tool Works, Inc. (petitioner) is a corporation organized
and existing under the laws of the State of Delaware. At the
time of the filing of the petition, petitioner’s principal place
of business was located in Glenview, Illinois. During 1992,
petitioner and its subsidiaries filed a consolidated Federal
income tax return, reported income on a calendar year basis, and
used the accrual method of accounting.
In 1975, the DeVilbiss Co. (DeVilbiss) was a division of
Champion Spark Plug Co. (Champion). On October 9, 1975,
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: May 25, 2011