In the

United States Court of Appeals

For the Seventh Circuit

No. 09-3163

WELLPOINT, INC.,

Petitioner-Appellant,

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent-Appellee.

Appeal from the United States Tax Court.

No. 13585-05—Diane L. Kroupa, Judge.

ARGUED FEBRUARY 9, 2010—DECIDED MARCH 23, 2010

Before POSNER, ROVNER, and SYKES, Circuit Judges.

POSNER, Circuit Judge. The petitioner, WellPoint (successor to Anthem, Inc.), is a for-profit seller of health

insurance policies through subsidiaries that include a

number of Blue Cross Blue Shield insurance companies

(licensees of the Blue Cross and Blue Shield Association).

In the 1990s, the petitioner, when it was still Anthem,

acquired three such companies, one each in Connecticut,

Kentucky, and Ohio. Both the acquiring and the acquired
2 No. 09-3163

companies were at the time mutual insurance companies,

so the mergers had no tax consequences; the members

of Anthem and of the three acquired companies voted

to merge and the mergers made them all members of

Anthem, now WellPoint.

The acquired companies had been formed many

years earlier as nonprofit entities dedicated to providing

health-related benefits on a charitable basis, and that

was their status when they were acquired. But sometime

after the acquisitions, the attorneys general of the three

states of the acquired companies each sued WellPoint

charging that it was using the acquired assets to make

profits, in violation of the restrictions that the charitable

status of the acquired companies had placed on the

use of their assets. The cases were eventually settled

by WellPoint’s paying $113,837,500 to the states. The

Internal Revenue Service refused to allow WellPoint to

deduct from its taxable income either that amount, or

the legal expenses that it had incurred (another $827,595)

in the litigation, as “ordinary and necessary” business

expenses. 26 U.S.C. § 162(a). WellPoint challenged the

ruling in the Tax Court and lost. The court held that

WellPoint’s settlement payments were capital expenditures and so could not be deducted as ordinary and

necessary business expenses.

The parties disagree about the scope of appellate review

of such a ruling. WellPoint argues that review should

be plenary—we should give no deference to the Tax

Court’s determination. The government argues that we

should defer to the ruling unless convinced that it is

clearly erroneous.
No. 09-3163 3

Rulings on pure issues of law, such as the meaning of

“ordinary and necessary business expense” or “capital

expenditure,” are subject to plenary review, while

findings of fact are reviewed just for clear error. Controversy persists over the proper scope of appellate review

of the application of a legal standard to the facts of a

particular case (such rulings are often referred to confusingly as “ultimate findings of fact” or resolutions of

“mixed questions of law and fact”). The better view, we

(and others) have said in previous cases, e.g., United

States v. Frederick, 182 F.3d 496, 499 (7th Cir. 1999);

Hartford Accident & Indemnity Co. v. Sullivan, 846 F.2d

377, 384 (7th Cir. 1988); Wright v. United States, 809 F.2d

425, 428 (7th Cir. 1987); Wright v. Commissioner, 571 F.3d

215, 219 (2d Cir. 2009); ASA Investerings Partnership v.

Commissioner, 201 F.3d 505, 511 (D.C. Cir. 2000), is that

the clear-error standard should govern the review of a

decision that applies a legal standard to particular

facts. The district court (or, as in this case, the Tax Court,

the decisions of which are reviewed “in the same

manner and to the same extent as decisions of the

district courts in civil actions tried without a jury,” 26

U.S.C. § 7482(a)(1); see, e.g., ASA Investerings Partnership

v. Commissioner, supra, 201 F.3d at 511) has a greater

immersion in the facts of a case than the court of appeals. Also, when a decision is fact-specific, plenary review

is not required in order to maintain uniformity of legal

principles throughout the circuit. An appellate court’s

“main responsibility is to maintain the uniformity and

coherence of the law, a responsibility not engaged if the

only question is the legal significance of a particular and
4 No. 09-3163

nonrecurring set of historical events.” Mucha v. King, 792

F.2d 602, 605-06 (7th Cir. 1986).

This analysis implies that the clear-error standard

should govern the review of a ruling that a particular

expenditure was or was not an ordinary and necessary

business expense as distinct from a capital expenditure.

And so we held in Reynolds v. Commissioner, 296 F.3d 607,

612-15 (7th Cir. 2002). But we have to reckon with the

Supreme Court’s statement that “the general characterization of a transaction for tax purposes is a question of law

subject to review,” Frank Lyon Co. v. United States, 435 U.S.

561, 581 n. 16 (1978). (By “review” the Court must have

meant plenary review, since factfindings are subject to

review, albeit just for clear error.)

Naturally this formula, given its sponsor, has been

recited in subsequent cases. E.g., Wellons v. Commissioner,

31 F.3d 569, 570 (7th Cir. 1994); Dow Chemical Co. v.

United States, 435 F.3d 594, 599 n. 8 (6th Cir. 2006). But

what does “general characterization” mean? Classifying

a particular expenditure as an expense on the one hand

or as a capital expenditure on the other is applying a

legal standard to facts. The Dow opinion interpreted

“general characterization” to include such classifications. We are dubious. A judge asked in a bench trial

to decide whether the defendant was negligent applies a

legal standard (the negligence standard) to the facts of

the case—and appellate review is deferential, Thomas v.

General Motors Acceptance Corp., 288 F.3d 305, 307-08

(7th Cir. 2002); Downs v. United States, 522 F.2d 990, 999

(6th Cir. 1975); see generally St. Mary’s Medical Center of
No. 09-3163 5

Evansville, Inc. v. Disco Aluminum Products Co., Inc., 969

F.2d 585, 588-89 (7th Cir. 1992), as it should be according to

our analysis. We don’t see how a negligence case differs in

this respect from this tax case.

We needn’t wade deeper into this mire, however. For

this is not a case in which the standard of review determines the outcome—a case in which we would affirm if

the standard were clear error and reverse if it were

mere error. We would affirm under either standard.

We’ll begin our analysis by explaining the difference

between a capital expenditure and an ordinary and

necessary business expense, with the aid of examples.

The cost of buying a building is a capital expenditure

because a building has “a useful life substantially

beyond the taxable year,” Treas. Reg. § 1.263(a)-2(a), which

is the general understanding of “capital expenditure.” See,

e.g., U.S. Freightways Corp. v. Commissioner, 270 F.3d 1137,

1143-44 (7th Cir. 2001); Crosley Corp. v. United States,

229 F.2d 376, 379 (6th Cir. 1956); Bruns v. Commissioner,

T.C. Memo 2009-168, 2009 WL 2030886, at *9. A capital

expenditure is not deductible as a business expense

in the year in which it is made; instead it must be depreciated over its useful life, and the amount of depreciation

each year is all that is deductible that year. E.g., Crosley

Corp. v. United States, supra, 229 F.2d at 379. In this way,

cost is matched temporally with revenue, which is a

desideratum of tax law.

The purchase price of a capital asset is not the only

example of a capital expenditure. Any expenditure is

capital if its “utility . . . survives the accounting period” in
6 No. 09-3163

which it is made. Sears Oil Co. v. Commissioner, 359 F.2d

191, 197 (2d Cir. 1966); see also Clark Oil & Refining Corp. v.

United States, 473 F.2d 1217, 1219-20 (7th Cir. 1973). So an

expense incurred to enhance the value of a capital

asset must be capitalized, and thus amortized over the

asset’s remaining life.

In contrast, business expenses incurred in day-to-day

operations are deemed ordinary business expenses and so

(if they also are necessary, which in this context just

means “appropriate and helpful,” Commissioner v.

Heininger, 320 U.S. 467, 471 (1943); Welch v. Helvering,

290 U.S. 111, 113-14 (1933) (Cardozo, J.)) they are deductible from the business’s taxable income in the year in

which they are incurred. Thus repairs to a building,

which preserve but do not enhance the building’s

value, can be expensed, while improvements intended

to increase the building’s value have to be capitalized.

Moss v. Commissioner, 831 F.2d 833, 835 (9th Cir.

1987) (“expenditures for permanent improvements or

betterments made to increase the value of any property

must be capitalized and depreciated over the useful life

of the improvement”); Connally Realty Co. v. Commissioner,

81 F.2d 221, 221-22 (5th Cir. 1936); Difco Laboratories, Inc.

v. Commissioner, 10 T.C. 660, 667 (1948); Appeal of

Illinois Merchants Trust Co., 4 B.T.A. 103, 106 (1926); Treas.

Reg. §§ 1.162-4, 1.263(a)-1(a), (b). As further explained

in the Connally opinion, “Repairs to a building are necessary, and regarded as ordinary although occasioned in

unusual degree by storm, flood, or the like. But this

building fell into no disrepair, nor was it physically

injured in any way requiring restoration. The city altered

its street with detriment to the desirability of portions
No. 09-3163 7

of the building for rent, but, so far as appears, without

touching the building. The outlay was made in an effort

to adapt the building to changed surroundings, but not

to repair any physical damage to it.” 81 F.2d at 221.

Just as repairs prevent a building from collapsing,

so expenditures to defend title to the building (maybe

someone is seeking specific performance of what he

claims, and you deny, is your agreement to sell him the

building) are incurred to protect the building against

what from the owner’s standpoint might be a loss equivalent to its collapsing. But such expenditures, because

incurred to defend (or assert) the ownership of a capital

asset, cannot be expensed.

The distinction may seem tenuous, but it is well established. See Lark Sales Co. v. Commissioner, 437 F.2d 1067,

1077 (7th Cir. 1970) (expenses “incurred for the purpose

of defending and protecting the Medds’ title or property

rights in the Dairy Queen trade name and a trade phrase

originated by the Medds . . . were capital in nature and

not deductible as a business expense”); Burch v. United

States, 698 F.2d 575, 579 (2d Cir. 1983); Redwood Empire

Savings & Loan Ass’n v. Commissioner, 628 F.2d 516, 520-21

(9th Cir. 1980); Melcher v. Commissioner, T.C. Memo. 2009-

210, 2009 WL 2950820, at *4-5; Treas. Reg. § 1.212-1(k)

(“expenses paid or incurred in defending or perfecting

title to property, in recovering property (other than

investment property and amounts of income which, if

and when recovered, must be included in gross income),

or in developing or improving property, constitute a part

of the cost of the property and are not deductible expenses”); Treas. Reg. § 1.263(a)-2(c).
8 No. 09-3163

The particular expenses involved in this case were

incurred in defending a lawsuit. A business that is sued

for unpaid taxes, say, or unpaid rent, is allowed to

deduct its expenses in defending the suit as “ordinary”

business expenses. Trust Under the Will of Binham v. Commissioner, 325 U.S. 365, 376 (1945); see also Commissioner

v. Tellier, 383 U.S. 687, 689-90 (1966); Commissioner v.

Heininger, supra, 320 U.S. at 471-72; A.E. Staley Mfg. Co. &

Subsidiaries v. Commissioner, 119 F.3d 482, 487-91 (7th

Cir. 1997); Hauge v. Commissioner, T.C. Memo 2005-276,

2005 WL 3214581 at *5-6. They are the sort of expense

that is incurred to preserve the operation and profitability of the business rather than to acquire or retain or

improve a specific capital asset, and thus are “ordinary

and necessary” even though they are not as regular

and predictable as costs of labor and materials.

WellPoint claims that the cost of the settlement, and (what

need not be discussed separately) the legal expenses

that it incurred in the litigation, were “ordinary” because

it was defending against claims that it was using

its property—the assets of the acquired BCBS companies—improperly. On this view, WellPoint was like a

landlord who is sued for violating the building code by

failing to maintain his building properly. But the government argues that WellPoint was defending its title to

the acquired assets, and we said that expenses incurred

in defending title to a capital asset are not ordinary expenses. WellPoint ripostes that the attorneys general

never questioned its title but merely its use of the assets

for profit-making rather than charitable purposes.

Such disputes over characterization are resolved by

application of what is called the “origin of the claim”
No. 09-3163 9

doctrine: costs incurred in defending a lawsuit are classified as expenses or as capital expenditures depending

on the nature of the claim that gave rise to the litigation.

United States v. Gilmore, 372 U.S. 39, 48-49 (1963); Dower

v. United States, 668 F.2d 264, 266 (7th Cir. 1981); Clark

Oil & Refining Corp. v. United States, supra, 473 F.2d at 1219-

21; cf. A.E. Staley Mfg. Co. & Subsidiaries v. Commissioner,

supra, 119 F.3d at 489. In our hypothetical building-code

case the landlord’s litigation expenses were in lieu

of proper maintenance, so they are treated like the

repair expenses for which they are a substitute, and

thus can be expensed. But if the landlord were

defending against a suit for specific performance of a

contract to sell the building, he would be defending

the ownership of his capital asset and so the origin of

the claim would be a dispute over title.

In each of the three suits out of which the present

dispute arises WellPoint had acquired assets that were

held in a charitable trust. Two of the suits asked that

the assets be taken out of WellPoint’s hands entirely

and placed in charitable entities with which WellPoint

would have nothing to do. The third, the Ohio suit,

asked that the assets be placed in a charitable trust but

left open the possibility that WellPoint might be the

trustee. But whether the origin of a claim is a dispute

over a capital asset or over the day-to-day operations of

the business is not to be decided by reference to the

outcome of the suit. United States v. Gilmore, supra, 372

U.S. at 48-49; McKeague v. United States, 12 Cl. Ct. 671, 674

(1987), affirmed, 852 F.2d 1294 (Fed. Cir. 1988); Colvin v.

Commissioner, T.C. Memo. 2004-67, 2004 WL 516195, at *4-5.
10 No. 09-3163

Otherwise, as the Supreme Court explained in the Gilmore

case, “if two taxpayers are each sued for an automobile

accident while driving for pleasure, deductibility of their

litigation costs would turn on the mere circumstance of the

character of the assets each happened to possess, that is,

whether the judgments against them stood to be satisfied

out of income- or nonincome-producing property. We

should be slow to attribute to Congress a purpose producing such unequal treatment among taxpayers, resting

on no rational foundation.” 372 U.S. at 48.

The remedy that the parties to a lawsuit seek, obtain, or

agree on if they settle the case will sometimes be

unrelated to the nature of the claim out of which the

suit arose, as in Barr v. Commissioner, T.C. Memo 1989-420,

1989 WL 90207; see also Lucas v. Commissioner, 388 F.2d

472, 476 (1st Cir. 1967); Yates Industries, Inc. v. Commissioner,

58 T.C. 961, 971-72 (1972); Treas. Reg. § 1.212-1(m). Imagine

a suit to establish the plaintiff’s ownership of a building,

and the parties agree in settling the suit that the

defendant can retain the building but the plaintiff will be

allowed to occupy it as a tenant. The origin of the

claim would be a dispute over a capital asset, namely

ownership of an asset that has a useful life of more than

a year, even though the remedy would be what one

might expect in a dispute between a landlord and a tenant

over the terms of the lease. The parties’ litigation expenses

would have been incurred to secure or defend ownership

of a capital asset, whatever the terms of the settlement.

Still, the remedy sought or ordered or agreed to can be

a clue to the nature of the claim. Lange v. Commissioner,
No. 09-3163 11

T.C. Memo. 1998-161, 1998 WL 217892, at *3; Estate of

Block v. Commissioner, T.C. Memo. 1988-159, 1988 WL 33528;

cf. Boagni v. Commissioner, 59 T.C. 708, 713 (1973). And that

might seem to be the case here, at least with respect to the

settlement in the Ohio suit. WellPoint says it shows that

the attorney general was just trying to prevent a misuse of

the acquired assets. But this misses the distinction between

legal and beneficial ownership. A trustee has title to the

assets of the trust, but the beneficiaries are the real owners

because they are entitled to the income or other benefits

that the assets of the trust yield, minus only the trustee’s

reasonable fee for managing the assets. Hatcher v. Southern

Baptist Theological Seminary, 632 S.W.2d 251, 252 (Ky. 1982)

(“when property is held in trust the trustee holds the legal

title and the beneficiary or beneficiaries are considered to

be owners of the equitable title”); Guitner v. McEowen, 124

N.E.2d 744, 747 (Ohio App. 1954); Restatement (Third) of

Trusts § 2 and comments d, f (2003); George Gleason

Bogert, George Taylor Bogert & Amy Morris Hess, The Law

of Trusts and Trustees § 1 (3d ed. 2009). The attorneys

general were trying to strip WellPoint of its equitable

ownership—its right to use the acquired assets for profit.

Whether WellPoint remained the trustee was a detail.

Moreover, although the state officials settled for money,

they did not claim that WellPoint had (yet) caused any

harm to anyone by operating the acquired BCBSs for

profit—that it had charged higher insurance premiums

or provided less coverage or treated claims less generously. The $113 million that the attorneys general received

(and handed over to charitable entities to hold and manage) was not damages; it was in lieu of their recovering the

acquired assets.
12 No. 09-3163

A note of confusion has been injected by the plaintiffs’

characterizing their claims as “cy pres” claims. The cy pres

(“as near as”) doctrine allows a court to alter a charity’s

objective if the original objective can no longer be

achieved. The Earl of Craven—having in “mind the sad

and lamentable visitation of Almighty God upon the

kingdom, but more especially upon the Cities of London

and Westminster, in the year 1665 and 1666, by the pestilence and great mortality, and the great necessity that

there was for providing a pest house for the sick, and

burying-place for the dead”—had established a trust for

the maintenance of a pest house and plague pit. But when

the Black Plague no longer ravaged the poor residents of

St. Martin’s-in-the-Fields, the trust was permitted to use

some of its assets to help treat persons with other contagious diseases. Attorney-General v. Earl of Craven, 21

Beavan 392, 52 Eng. Rep. 910, 912, 918-19 (Ch. 1856); see

also National Foundation v. First National Bank of Catawba

County, 288 F.2d 831, 834-36 (4th Cir. 1961). But the trust

would not have been allowed to substitute, for its pest

house and plague pit, a shelter and burying place for

homeless tabby cats, since that objective would not

have been near its original and now unattainable one.

The doctrine has no application to this case. The dispute

is remote from the standard cy pres case, in which the

issue is whether charitable assets can be kept out of the

hands of the residuary legatees even though the original

objective of the charitable bequest can no longer be

achieved. Rice v. Stanley, 327 N.E.2d 774, 784-85 (Ohio

1975); Ministers & Missionaries Benefit Board of American
No. 09-3163 13

Baptist Convention v. Meriden Trust & Safe Deposit Co., 94

A.2d 917 (Conn. 1953); Citizens Fidelity Bank & Trust Co. v.

Isaac W. Bernheim Foundation, 205 S.W.2d 1003, 1007-08 (Ky.

1947); Restatement (Third) of Trusts § 67 (2003). The

original charitable objective of the acquired entities—namely the provision of health insurance—is not

unattainable. What has happened rather is that the

assets devoted to its attainment have been (according to

the suits) unlawfully used to provide health insurance

for profit; it’s as if the assets had been stolen.

Before concluding we need to consider the alternative

ground for affirmance—or purported ground for

affirmance—advanced by the government in its brief and

strongly urged by its lawyer at argument. More precisely,

we need to consider whether we can consider the alternative ground.

The ground is that the settlement with WellPoint was

in effect a partial restoration of the acquired assets to

their rightful owners and that like any other repayment

of money it was not a capital expenditure and therefore

should have no tax consequences at all. Although the

government asks us to affirm the Tax Court’s judgment

rather than to modify it, were we to accept the alternative

ground this would amount to repudiating the court’s

holding that the costs incurred by WellPoint were

capital expenditures, and would place a cloud over WellPoint’s seeking to deduct the cost in the future as a

capital expenditure to be amortized over the life of the

acquired assets that WellPoint retains by virtue of

having coughed up $113 million to keep them. Litigation
14 No. 09-3163

expenses designed to obtain or protect a capital asset are

added to the basis (essentially, the cost) of the asset and

thus increase the amount of depreciation that the owner

of the asset can take as a deduction from taxable

income over its remaining life. 26 U.S.C. § 1016; Woodward

v. Commissioner, 397 U.S. 572, 574-79 (1970); Lange v.

Commissioner, supra, at *3; Noel v. Commissioner, T.C. Memo

1997-113, 1997 WL 93310, at *7-9. That’s WellPoint’s

fallback position, should we rule (as we have ruled) that

it is not entitled to deduct the settlement and associated

legal fees as ordinary and necessary business expenses.

Had the government wanted us to modify the Tax

Court’s judgment, it would have had to file a cross-appeal.

E.g., El Paso Natural Gas Co. v. Neztsosie, 526 U.S. 473, 479

(1999); Morley Construction Co. v. Maryland Casualty Co., 300

U.S. 185, 190-92 (1937) (Cardozo, J.); Doll v. Brown, 75

F.3d 1200, 1207 (7th Cir. 1996); cf. Eugene Gressman et al.,

Supreme Court Practice 489-94 (9th ed. 2007). An appellant

is permitted to file a reply brief after the appellee files

his brief, and so an appellee who is also an appellant—that

is, who is also seeking relief against the lower court’s

judgment—should have the same right to respond to

his opponent’s brief, and he invokes that right by filing

his own appeal, called a cross-appeal. The filing of a crossappeal also serves to alert the court to the dual role of

the parties in the appeal.

But the government is not seeking relief against the Tax

Court’s judgment—though this conclusion depends on

precisely what the “judgment” in a case is. The judgment

is not the court’s opinion or reasoning; it is the court’s
No. 09-3163 15

bottom line, which in this case is the denial of the deduction sought by WellPoint in the tax years in question. The

government asks us to modify the reasoning of the Tax

Court so that in some future tussle with the Internal

Revenue Service WellPoint will not be allowed to

deduct depreciation of the settlement and litigation

expenses.

But this just illustrates “that the appellee may, without

taking a cross-appeal, urge in support of a decree any

matter appearing in the record, although his argument may

involve an attack upon the reasoning of the lower court or an

insistence upon matter overlooked or ignored by it.” United

States v. American Railway Express Co., 265 U.S. 425, 435

(1924) (Brandeis, J.) (emphasis added); see also United

States v. New York Telephone Co., 434 U.S. 159, 166 n. 8

(1977); Ruth v. Triumph Partnerships, 577 F.3d 790, 796 (7th

Cir. 2009); Moss v. Kopp, 559 F.3d 1155, 1161 n. 6 (10th

Cir. 2009). To rule otherwise would lead to endless disputes over whether arguments by an appellee ostensibly

defending the judgment were planting time bombs

under the appellant. The cross-appeal rule is not so vital

that it justifies haggling over borderline cases. Doubts

should therefore be resolved against finding that the

appellee’s failure to file a cross-appeal forfeited his right

to argue an alternative ground. See 15A Charles Alan

Wright, Arthur R. Miller & Edward H. Cooper, Federal

Practice and Procedure § 3904, pp. 198-209 (2d ed. 1992); see

also Pearl v. Keystone Consolidated Industries, Inc., 884

F.2d 1047, 1052-53 (7th Cir. 1989); Jordan v. Duff & Phelps,

Inc., 815 F.2d 429, 439 (7th Cir. 1987). Otherwise courts
16 No. 09-3163

will be sucked into inconclusive debates over whether

something said in a district court opinion, though not

preclusive by operation of res judicata or collateral

estoppel (or stare decisis, because district court decisions

do not have the force of precedent, e.g., Boyd v. Owen, 481

F.3d 520, 527 (7th Cir. 2007); Colby v. J.C. Penney Co., Inc.,

811 F.2d 1119, 1124 (7th Cir. 1987); NASD Dispute Resolution, Inc. v. Judicial Council, 488 F.3d 1065, 1069 (9th Cir.

2007)), nevertheless affects the rights of the appellee.

United States ex rel. Stachulak v. Coughlin, 520 F.2d 931,

937 (7th Cir. 1975), is a case that illustrates when the

filing of a cross-appeal is required. The appellee, confined

in the psychiatric ward of a state prison, brought a

federal habeas corpus proceeding to gain his freedom. The

district court found merit in his case and ordered him

released from the prison unless the state gave him

another commitment proceeding (in which the state’s

burden of proof would be greater) within 60 days. Without

cross-appealing, the appellee argued that the statute

under which he was confined was unconstitutional root

and branch. We held that he could not make this argument without filing a cross-appeal because if his

argument were accepted it would require his immediate

release and preclude a further commitment hearing

and thus change the judgment from conditional release

in 60 days to unconditional release immediately. In this

case, in contrast, the judgment does not require that

WellPoint be permitted to treat its settlement and litigation expenses as a depreciable (and therefore over time

a deductible) capital expenditure, and so the govern-
No. 09-3163 17

ment’s argument that they shouldn’t be so treated does

not challenge the judgment, as distinct from reasoning

by the Tax Court that might influence decision in a future

case but would require no alteration in the judgment in

the present one.

The strongest case that we’ve found (though not strong

enough) for requiring the appellee to file a cross-appeal

even though he isn’t seeking to alter the judgment is

EEOC v. Chicago Club, 86 F.3d 1423 (7th Cir. 1996). The

defendant prevailed in the district court and on appeal

argued an alternative ground for affirmance without

having filed a cross-appeal. We rejected the alternative

ground because the appellee did not have standing to

raise it, and then remarked that “the fact that the

[appellee] did not file a cross-appeal would also

complicate our ability to resolve [the] important issue

[raised by the appellee] even if standing were present.” Id.

at 1431-32. This was a dictum that even on its own

terms did not go so far as to state that the appellee

was required to file a cross-appeal.

And so we can address, at last, the merits of the government’s alternative ground. We can be brief, as the

ground is—groundless. It is true that if you receive money

as a loan and repay it, the repayment is not deductible

from your taxable income, because you never claimed to

own the money you had borrowed. Commissioner v. Tufts,

461 U.S. 300, 307 (1983); Vukasovich, Inc. v. Commissioner,

790 F.2d 1409, 1413 (9th Cir. 1986); Brenner v. Commissioner,

62 T.C. 878, 883 (1975). But WellPoint always claimed (it

still claims) to have equitable title to the assets it ac-
18 No. 09-3163

quired. The expenses that it reasonably incurred to defend

that claim—the claim to own the assets free and clear—are

capital expenditures, not repayments.

AFFIRMED.

3-23-10