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connection with” a reacquisition of stock and does not simply
encompass those amounts which were paid for the reacquired stock
itself. We disagree with respondent, however, that the payment
in question was made “in connection with” the reacquisition of
stock within the meaning of section 162(k). In accordance with
the quoted legislative history underlying section 162(k),
payments, although arising out of the same general circumstances
as a reacquisition and made proximate thereto, are not denied
deductibility by section 162(k) when they lack any other nexus to
the reacquisition. Such may be the case, the conference report
clarifies, where, as here, a reacquisition payment is accompanied
by a payment in settlement of claims as to litigation or
employment.
In Ft. Howard, the taxpayer incurred expenses in obtaining
funds necessary to effect a leveraged buyout (LBO). We concluded
that these financing expenses, except for certain interest
payments, were incurred “in connection with” the LBO because the
LBO would not have been possible without the financing. We found
that the financing costs were both a cause and an effect of the
redemption. We noted that financing was “necessary” to the
transaction as a whole and was an “integral part” of a detailed
plan. Id. at 352-353. Here, by contrast, there was no similar
relationship between petitioner’s settlement of the litigation
and employment claims, on the one hand, and its repurchase of
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