The Requirement that a Capital Expenditure Create or Enchance an Asset
1974; Boston College Law School; Volume: 15; Issue: 3 Linguagem: Inglês
ISSN
0161-6587
Autores Tópico(s)Corporate Taxation and Avoidance
Resumos themselves) may be viewed as having continued utility in the taxpayer's business throughout the period when a competitor could have used the records. Had the taxpayer achieved its goal by paying the original owner to destroy his records, the necessary asset might be found in the owner's contractual agreement. A similar problem arises in connection with payments to release the taxpayer from an onerous contract. Such payments have generally been held deductible as ordinary and necessary business expenses. See, e.g., Capitol Indem. Ins. Co. v. Commissioner, 237 F.2d 901 (7th Cir. 1956); Cleveland Allerton Hotel, Inc. v. Commissioner, 166 F.2d 805 (6th Cir. 1948) (lessee purchased fee to be rid of onerous lease; excess of purchase price over value of property deductible); Helvering v. Community Bond & Mortgage Corp., 74 F.2d 727 (2d Cir. 1935) (purchase of stock); Metropolitan Co. v. United States, 176 F. Supp. 195 (S.D. Ohio 1959); Montana Power Co. v. United States, 171 F. Supp. 943 (Ct. Cl. 1959); Olympia Harbor Lumber Co., 30 B.T.A. 114 (1934), affd on other issues, 79 F.2d 394 (9th Cir. 1935); Denholm & McKay Co., 2 B.T.A. 444, acquiesced in, IV-2 Cum. Bull. 2 (1925); Pressed Steel Car Co., 20 T.C. 198 (1953), acquiesced in, 1956-2 Cum. Bull. 8 (purchase of stock); Stuart Co., 9 CCH Tax Ct. Mem. 585 (1950), aff'd, 195 F.2d 176 (9th Cir. 1952). But in the similar situation where a corporation pays a call premium to retire stock in order to obtain new financing at better terms, the call premium is a capital expenditure. See H. & G. Indus., Inc., T.C. No. 20 (April 30, 1973). In Darlington-Hartsville Coca-Cola Bottling Co. v. United States, 393 F.2d 494 (4th Cir.), cert. denied, 393 U.S. 962 (1968), the taxpayer made payments to its supplier (Coca-Cola) to induce the supplier to purchase and dissolve a company (Croswell) through which the taxpayer's dealings with CoCa-Cola had been conducted. After the dissolution o(Croswell, the taxpayer entered into contracts of indefinite duration with CoCa-Cola. The court rejected the district court's ruling that payments to be relieved of an onerous contract are per as capital expenditures, but required capitalization because the taxpayer received a positive business benefit in the form of its contracts with Coca-Cola. The distinction thus drawn between Darlington-Hartsville and the other cases cited above does not seem particularly desirable as a matter of policy, but it is consistent with the limitation of capital expenditures to costs that produce or enhance an asset. Another expenditure related to future years' business activities but not productive of an asset is the cost of a management survey. See, e.g., Goodwyn Crockery Co., 37 T.C. 355 (1961), afrd, 315 F.2d 110 (6th Cir. 1963) (deductible). 219 See, e.g., Vermont Transit Co. v. Commissioner, 218 F.2d 468 (2d Cir.), cert. denied, 349 U.S. 945 (1955) (franchise to operate bus line);' Hampton Pontiac, Inc. v. United
Referência(s)