Opinion ID: 2996789
Heading Depth: 2
Heading Rank: 1

Heading: ITW misreads the tax court’s approach to Webb.

Text: First, the tax court did not apply Webb inflexibly. ITW reads the tax court’s opinion to state that “any payment in satisfaction of a contingent liability acquired in a capital transaction is always a capital expenditure.” (Appellants’ Opening Br. at 19). We do not read the tax court’s opinion so restrictively. Rather, we note the opinion accurately cites Webb for the proposition that “[g]enerally, the payment of a liability of a preceding owner of property by the person acquiring such property, whether or not such liability was fixed or contingent at the time such property was acquired, is not an ordinary and necessary business expense.” Illinois Tool Works, Inc. v. Commissioner, 117 T.C. 39, 44-45 (2001) (emphasis added). The tax court’s language analyzing ITW’s case in light of the above general principle does not foreclose in every circumstance an outcome different than the one reached; rather, it simply notes that ITW’s arguments for treating all but $1 million of the judgment as an ordiNo. 02-1239 9 nary business expense are not persuasive in “the present case.” Id. at 47.3