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Indopco, Inc. v. Cir, 503 U.S. 79 (1992)
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General SummaryThis case is from a collection containing the full text of over 16,000 Supreme Court cases from 1793 to the present. The body of Supreme Court decisions are, effectively, the final interpretation of the Constitution. Only an amendment to the Constitution can permanently overturn an interpretation and this has happened only four times in American history.
Indopco, Inc. v. Cir, 503 U.S. 79 (1992)
INDOPCO, Inc. v. Commissioner of Internal Revenue No. 90-1278 Argued Nov. 12, 1991 Decided Feb. 26, 1992 503 U.S. 79
Syllabus
On its 1978 federal income tax return, petitioner corporation claimed a deduction for certain investment banking fees and expenses that it incurred during a friendly acquisition in which it was transformed from a publicly held, freestanding corporation into a wholly owned subsidiary. After respondent Commissioner disallowed the claim, petitioner sought reconsideration in the Tax Court, adding to its claim deductions for legal fees and other acquisition-related expenses. The Tax Court ruled that, because long-term benefits accrued to petitioner from the acquisition, the expenditures were capital in nature, and not deductible under § 162(a) of the Internal Revenue Code as "ordinary and necessary" business expenses. The Court of Appeals affirmed, rejecting petitioner’s argument that, because the expenses did not "create or enhance . . . a separate and distinct additional asset," see Commissioner v. Lincoln Savings & Loan Assn., 403 U.S. 345, 354, they could not be capitalized under § 263 of the Code.
Held: Petitioner’s expenses do not qualify for deduction under § 162(a). Deductions are exceptions to the norm of capitalization, and are allowed only if there is clear provision for them in the Code and the taxpayer has met the burden of showing a right to the deduction. Commissioner v. Lincoln Savings & Loan Assn., supra, holds simply that the creation of a separate and distinct asset may be a sufficient condition for classification as a capital expenditure, not that it is a prerequisite to such classification. Nor does Lincoln Savings prohibit reliance on future benefit as means of distinguishing an ordinary business expense from a capital expenditure. Although the presence of an incidental future benefit may not warrant capitalization, a taxpayer’s realization of benefits beyond the year in which the expenditure is incurred is important in determining whether the appropriate tax treatment is immediate deduction or capitalization. The record in the instant case amply supports the lower court’s findings that the transaction produced significant benefits to petitioner extending beyond the tax year in question. Pp. 83-90.
918 F.2d 426 (CA3 1990) affirmed.
BLACKMUN, J., delivered the opinion for a unanimous Court.
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Chicago: U.S. Supreme Court, "Syllabus," Indopco, Inc. v. Cir, 503 U.S. 79 (1992) in 503 U.S. 79 503 U.S. 80. Original Sources, accessed November 25, 2024, http://originalsources.com/Document.aspx?DocID=3V8QZ9IKHE7UYW9.
MLA: U.S. Supreme Court. "Syllabus." Indopco, Inc. v. Cir, 503 U.S. 79 (1992), in 503 U.S. 79, page 503 U.S. 80. Original Sources. 25 Nov. 2024. http://originalsources.com/Document.aspx?DocID=3V8QZ9IKHE7UYW9.
Harvard: U.S. Supreme Court, 'Syllabus' in Indopco, Inc. v. Cir, 503 U.S. 79 (1992). cited in 1992, 503 U.S. 79, pp.503 U.S. 80. Original Sources, retrieved 25 November 2024, from http://originalsources.com/Document.aspx?DocID=3V8QZ9IKHE7UYW9.
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