Illinois Tool Works, Inc. & Subsidiaries - Page 9




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                                       OPINION                                        
               The portion of the $17,067,339 court judgment that is in               
          issue is $6,956,590 because:  (1) Petitioner capitalized                    
          $1 million in its tax return, (2) respondent conceded an                    
          allowance of $2,154,160 for postacquisition interest expense, and           
          (3) respondent conceded a reduction of $6,956,589 for the                   
          disposal of acquisition assets.  We must decide whether the                 
          $6,956,590 in dispute should be capitalized as a cost of                    
          acquisition or deducted as a business expense.                              
               Section 162(a) provides a deduction for a taxpayer when an             
          expenditure is:  (1) An expense, (2) an ordinary expense, (3) a             
          necessary expense, (4) incurred during the taxable year, and                
          (5) made to carry on a trade or business.  Commissioner v.                  
          Lincoln Sav. & Loan Association, 403 U.S. 345, 352-353 (1971).              
          An expenditure is a “necessary expense” when it is appropriate or           
          helpful to the development of a taxpayer’s business.                        
          Commissioner v. Tellier, 383 U.S. 687, 689 (1966).  An                      
          expenditure is an “ordinary expense” when it is “normal, usual,             
          or customary” in the type of business involved.  Deputy v.                  
          Du Pont, 308 U.S. 488, 495-496 (1940).  Petitioner bears the                
          burden of proving entitlement to the claimed deduction.  Rule               
          142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992).              
               No current deduction is allowed for a capital expenditure.             
          See sec. 263(a)(1).  Section 1.263(a)-2(a), Income Tax Regs.,               





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