Opinion ID: 775137
Heading Depth: 3
Heading Rank: 1

Heading: Erlanger, Kentucky Distribution Site Studies

Text: 16 UDF's main office is in Norwood, Ohio. In the early 1990s, UDF began looking for a site on which to build a distribution facility that would house its own cold storage warehouses. Between 1991 and 1993, UDF paid Hixson, Inc., an engineering and design firm, to assist in locating an appropriate site. Hixson examined several potential sites. UDF intended to build only one distribution facility. Of the $55,000 spent by UDF to examine competing sites, only $16,500 related to the Erlanger, Kentucky site that was ultimately chosen. 17 On its 1993 tax return, UDF claimed that it could deduct those studies that related to all of the properties other than the Erlanger site, which had been abandoned upon deciding to go ahead with the Erlanger site. The government contended that UDF had engaged in one single project, which was to study available sites and build one distribution facility. Because the Hixson fees were incurred pursuant to one single plan, the government contended that all of the fees must be capitalized.The district court agreed with the government, finding that the fees were part of an integrated plan to build one distribution center and must be capitalized. 18