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opposition, respondent asserts petitioner did not benefit from
the expenditures. Rather, he asserts Schneider alone benefited
from the commitment and legal fees.
First, as a factual matter, petitioner did benefit from
Schneider’s procuring the loan commitment. While ACQ did not
exist when the Commitment Letter was signed, it was identified in
the letter as the borrower. It was organized soon after and
received the Bridge Loan proceeds. As the recipient of those
funds, ACQ was clearly benefited by the banks’ commitment, as was
petitioner, as the surviving entity after its merger with ACQ.
Schneider benefited as well, because the commitment to provide
financing enabled it to achieve its business goal of acquiring
petitioner, but Schneider’s benefit was not exclusive. Moreover,
while petitioner may initially have been hostile, and some of the
costs at issue arose because of petitioner’s hostility,
petitioner eventually approved the transaction. Petitioner
stands in the shoes of ACQ, which benefited from the loan by
virtue of its receipt and use of the loan proceeds. Thus, even
though some of the loan costs may have been incurred because
petitioner was initially hostile, petitioner ultimately obtained
and used the loan proceeds through its merger with ACQ.
26(...continued)
Opinion of the Board of Tax Appeals dated Feb. 6, 1942.
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