INDOPCO, Inc. v. Commissioner
P was target of takeover by Unilever and incurred significant investment banking and legal fees and other expenses which it sought to deduct as ordinary and necessary business expenses.
Are certain professional expenses incurred by a target corp. in the course of a friendly takeover deductible by that corp. as ‘ordinary and necessary’ business expenses under §162(a)?
-§162(a) allows the deduction of all the “ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.
-§263 allows no deduction for a capital expenditure-an amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate.
-Lincoln Savings was said to require a separate and distinct asset as a prerequisite for capitalization.
-The transaction produced significant benefits to National Starch that extended beyond the tax year in question.
-Expenses incurred for the purpose of changing the corporate structure for the benefit of future operations are not ordinary and necessary business expenses.
-The cost of acquiring stock, financial instruments, leases, and most intellectual property rights must be capitalized, as well as ‘intangibles’ such as amounts paid to obtain or modify contract rights or amounts paid to defend or perfect title.
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