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was unable to pay the loan commitment or legal fees or that
petitioner’s failure to pay would have adversely affected
petitioner; indeed, Schneider remained legally obligated, and it
initially paid the loan commitment fee.
Nonetheless, we agree with petitioner that legal obligation
is not dispositive and conclude that the loan commitment and
legal fees are deductible by petitioner because Schneider
incurred those costs on behalf of ACQ, and by extension
petitioner, so that petitioner could obtain the Bridge Loan.
The facts and holding of Waring Prods. Corp. v. Commissioner, 27
T.C. 921 (1957), are instructive. The taxpayer was a corporation
organized to hold and exploit certain patents. It attempted to
enter into a contract with a manufacturer to assemble and ship
its patented products, but the manufacturer refused because of
the taxpayer’s poor credit rating. To aid the taxpayer, a major
corporate shareholder, who later acquired all the taxpayer’s
stock, becoming its parent, agreed to enter into a contract
directly with the manufacturer, “pledging its own credit on
behalf of” the taxpayer. Id. at 924. The manufacturer at first
invoiced the shareholder, but later the taxpayer, for the
finished products, and the taxpayer made all payments on the
invoices. The shareholder, however, was never relieved of its
obligations to the manufacturer under the contract.
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