- 25 -
including “a reasonable proportion of the wages and salaries of
employees who spend some of their working hours laboring on the
acquisition”. Briarcliff Candy Corp. v. Commissioner, 475 F.2d
775, 781 (2d Cir. 1973), revg. on other grounds and remanding
T.C. Memo. 1972-43; see Commissioner v. Idaho Power Co., supra at
13; see also Cagle v. Commissioner, 539 F.2d 409, 416 (5th Cir.
1976), affg. 63 T.C. 86 (1974); Perlmutter v. Commissioner, 44
T.C. 382, 404 (1965), affd. 373 F.2d 45 (10th Cir. 1967); cf.
Strouth v. Commissioner, T.C. Memo. 1987-552 (costs of securing
potential leases, including checking the lessee’s credit,
reviewing the lease application, and drafting the lease documents
are capital expenditures).
When the Supreme Court was faced with the question as to the
capitalization of litigation costs incurred appraising the stock
of minority shareholders in connection with the majority
shareholder’s acquisition of that stock, the Court held that the
central inquiry was whether the expenditure originated in “the
process of acquisition”. Woodward v. Commissioner, supra at 577.
In other words, the Court set its focus on the directness of the
costs’ relationship to the acquisition and adopted a test under
which costs originating in the process of acquiring a capital
asset are considered capital expenditures.
Page: Previous 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 NextLast modified: May 25, 2011