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expenditure, regardless of the payor’s motives in making the
payment. Woodward v. Commissioner, supra at 578; Am. Stores Co.
& Subs. v. Commissioner, supra at 470.
Petitioners contend that the legal and consulting fees were
not incurred in connection with the acquisition of the Truckee
Hotel and should be allowable as a current deduction.
Petitioners emphasize that the lawsuit did not begin until 2
years after they purchased the hotel, and the settlement was not
reached until 3 years after the purchase. Petitioners claim that
Mr. Meglin did not have any cash resources, and their only
recourse available was the reduction of the purchase price.
Petitioners maintain that the adjustment of the purchase price is
not determinative because all facts and circumstances must be
considered.
The fact that legal costs are incurred after a capital asset
is acquired does not necessarily mean that the costs were not
incurred in connection with the acquisition of the asset. In
United States v. Hilton Hotels Corp., 397 U.S. 580, 584 (1970),
the Supreme Court noted that the prior passage of title in the
underlying stock acquisition was “a distinction without a
difference” in deciding whether costs of litigation arose out of
the process of acquisition. This Court reached a similar result
in Am. Stores Co. & Subs. v. Commissioner, supra (legal fees
incurred in defending against antitrust suit filed after stock
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