Nature of the Case
To access this section all you need to do is click here and register.
Facts
Indopco (P) is a Delaware corporation that manufactures and sells, adhesives, starches, and chemical products. Unilever expressed an interest in acquiring them in a friendly takeover. The largest shareholder told Unilever that they would be interested if a tax-free transaction could be arranged for them. Based on advice from its law firm, P got Morgan Stanley to evaluate the worth of the company to determine if the transaction with Unilever would be fair to shareholders. The original offer was in the $65 to $70 region but eventually, a price of $73.50 was agreed upon, and Morgan Stanley found that to be fair. Morgan Stanley charged P a fee of $2.2 million along with $7,586 for out pocket expenses and $18,000 for legal fees. The law firm charged $490,000 along with $15,069 for out of pocket expenses. P also incurred another $150,962 in expenses. P claimed these as deductions on its 1978 return. The IRS disallowed the claims. The Tax court claimed that these were capital expenses and not deductible under 162(a). This was based on the long-term benefits to P from the Unilever transaction. This was affirmed by the Third Circuit.
Support@ bsmsphd.com
Casebriefs Co