Opinion ID: 775137
Heading Depth: 3
Heading Rank: 2

Heading: Hixson Payments/Overall Plan

Text: 60 UDF contends that under Sibley, Lindsay & Curr v. Commissioner of Internal Revenue, 15 T.C. 106, 110 (1950), the Hixson payments attributable to costs relating to alternatives that were not implemented were deductible. UDF also distinguishes Nicolazzi v. Commissioner of Internal Revenue, 79 T.C. 109 (1982), on which the district court relied, arguing that Nicolazzi does not apply where a taxpayer had the option of choosing one study to the exclusion of other studies. 61 The tax court in Sibley distinguished mutually exclusive alternative plans, only one of which a taxpayer may select and act in accordance with, from multiple suggestions falling under one plan, one or more of which a taxpayer may select and act in accordance with. Sibley, 15 T.C. at 110. As noted by the district court, under Sibley, a taxpayer may deduct under § 165 the costs of unpursued plans only if those plans were not mutually exclusive, i.e., only if the taxpayer could have selected and acted in accordance with more than one. Id. at 110. 62 At issue in Nicolazzi was a lottery program in which participants completed multiple lease applications, with the expectationof acquiring at least one lease, and the hope of acquiring more than one. The taxpayer in Nicolazzi argued that each lease application was an independent transaction under § 165, an thus the costs of each unsuccessful lease application could be deducted. The tax court in Nicolazzi rejected this argument, finding that the relevant transaction is [the taxpayer's] investment in the [lottery] program, and the determination of whether [taxpayer] sustained a loss on that transaction must be based on overall program performance measured by reference to the aggregate of the lease applications. Nicolazzi, 79 T.C. at 131. 63 UDF argues that its payments to Hixson in connection with the plan to select a cite for its Cincinnati distribution center were more analogous to Sibley, which found deductible abandonment costs under § 165, than to Nicolazzi, which did not find deductible abandonment costs under § 165. However, UDF intended to select only one site for its Cincinnati facility. This fact is directly contrary to Sibley, where the taxpayer could have accepted all or any of the multiple plans presented.Sibley, 15 T.C. at 110. Further, as in Nicolazzi, the relevant transaction concerned UDF's interest in finding an acceptable site, somewhere, for its Cincinnati distribution center, rather than UDF's interest in any particular site. We find that the district court did not err when finding, under Nicolazzi, that UDF's Hixson payments were part of an overall plan to find a site for its Cincinnati distribution center.