Opinion ID: 399155
Heading Depth: 2
Heading Rank: 3

Heading: Post-Foreclosure Disposition Expenses.

Text: 30 American contends that the costs of selling property on which it has foreclosed should be deductible as ordinary and necessary business expenses under I.R.C. § 162(a). We disagree. 31 This court has previously concluded that post-foreclosure disposition expenses must be taken into account through adjustments to the taxpayer's bad debt reserve. Allstate Savings & Loan Ass'n. v. Commissioner, 68 T.C. 310 (1977), aff'd, 600 F.2d 760 (9th Cir. 1979), cert. denied, 445 U.S. 962, 100 S.Ct. 1649, 64 L.Ed.2d 237 (1980). We are bound by this precedent. Ellis v. Carter, 291 F.2d 270, 273 n.3 (9th Cir. 1961). We also agree with its conclusion that the expenses of selling the foreclosed property are inherently capital in nature. 68 T.C. at 320. Receipt of amounts representing a recovery of capital must be taken into account as a charge or credit to the bad debt reserve. I.R.C. § 595(b); Treas. Reg. § 1.595-1(e)(6). 32