54 Ohio St. L.J. 1505 (1993)
An Analysis of INDOPCO, Inc. v. Commissioner

handle is hein.journals/ohslj54 and id is 1531 raw text is: An Analysis of INDOPCO, Inc. v. Commissioner
On February 26, 1992 the Supreme Court of the United States decided
what may one day prove to be the most often cited tax case, INDOPCO, Inc. v.
Commissioner.1 The main issue involved a dispute between INDOPCO and the
Commissioner of the Internal Revenue Service (Service) concerning the
deductibility of banking and legal fees incurred with respect to a friendly
takeover.2 Due to the broad language used by Justice Blackmun, the case has
the potential3 to cause much controversy4 and litigation in areas that most
thought to be closed chapters in the story of current deductibility of trade or
business expenses under section 162(a) of the Internal Revenue Code
(Code).5
This Comment first examines cases leading up to, and which may have
been overruled by, INDOPCO.6 The Comment then outlines the facts of
INDOPCO as well as its procedural and substantive holdings. Next, the
Comment discusses the separate and distinct asset test, which INDOPCO
correctly rejected. The Comment then discusses the future benefits holding of
INDOPCO and its possible impact outside the friendly takeover arena. After
discussing the possible impact of INDOPCO, the Comment discusses the
proper test to apply when determining whether an expenditure should be
currently deducted under section 162 or capitalized under section 263. In this
respect, this Comment argues that courts should base their decisions on a
distortion of income theory, while giving consideration to practical concerns.
Finally, the Comment ends with recommendations as to how the Service should
handle deductibility of certain expenses in the future.
1 112 S. Ct. 1039 (1992). INDOPCO, Inc. was formerly known as National Starch and
Chemical Corp. (National Starch).
21d.
3 See Timothy J. McCormally, TEl Warns of IRS Agents Poised to Disallow
Historically Deductible Expenditures, 55 TAx NoTEs 739, 739 (1992).
4 Recent controversy has developed concerning the deductibility of expenses incurred
in removing asbestos. See infra notes 64-71 and accompanying text.
5 Some of these expenses include: advertising, employee training, repairs, and
expansion costs.
All section references contained herein are to the Internal Revenue Code of 1986, title
26 of the U.S. Code, unless otherwise indicated.
6 Some commentators argue that, due to the language used in INDOPCO and the facts
of some of the previous cases, INDOPCO can possibly be distinguished. See, e.g., George
B. Jarvas & Todd F. Maynes, Business Expansion and Protection in the Post INDOPCO
World, 55 TAX NOTEs 971, 972-79 (1992).

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