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INDOPCO, Inc. v. Commissioner

United States Supreme Court
503 U.S. 79 (1992)


Facts

INDOPCO, Inc. (INDOPCO) (plaintiff), formerly known as National Starch and Chemical Corporation, was a Delaware corporation. Unilever United States Inc. (Unilever), one of INDOPCO’s suppliers, sought to acquire INDOPCO in a friendly takeover. INDOPCO agreed and accordingly hired investment bankers and attorneys to handle the transaction. INDOPCO incurred an investment banker fee of $2,225,586, legal fees of $505,069, and miscellaneous fees relating to the acquisition of $150,962. On its federal tax return for that year, INDOPCO claimed a business expense deduction for the investment banker fees only. The Commissioner (defendant) determined that INDOPCO could not deduct the expenses. INDOPCO petitioned the Tax Court and claimed a deduction for the investment banker fees in addition to the legal and miscellaneous fees. The Tax Court held that all the expenditures were capital investments and therefore non-deductible under § 162 of the Internal Revenue Code. The Court of Appeals affirmed. The United States Supreme Court granted certiorari.

Rule of Law

Issue

Holding and Reasoning (Blackmun, J.)

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