Document: 25 L.Ed.2d 585 90 S.Ct. 1307 397 U.S. 580 UNITED STATES, Petitioner,v.HILTON HOTELS CORPORATION. No. 528. Argued Feb. 26, 1970. Decided April 20, Johnnie McK. Walters, Washington, D.C., for petitioner. Milton A. Levenfeld, Chicago, Ill., respondent. Mr. Justice MARSHALL delivered the opinion of Court. 1 This is companion case to Wood-ward v. Commissioner Internal Revenue, 572, 1302, 577, and presents a similar question involving tax treatment appraisal litigation expenses. 2 In 1953 taxpayer Hilton Hotels Corporation, which owned close 90% common shares Hotel Waldorf-Astoria determined merge two companies. retained consulting firm prepare merger study determine fair rate exchange between stock Waldorf stock. After this was completed, on November 12, 1953, entered into agreement under would be surviving corporation, 1.25 offered each outstanding share not already held by Hilton. On December 28, voted its approve requisite majority. Prior vote, holders about 6% had filed with their written objections merger, demanded payment stock, pursuant § 91 New York Stock Corporation Law, McKinney's Consol.Laws, c. 59. 3 31, certificate consolidation Secretary State York, thus consummating law. January 7, 1954, made cash offer dissenting shareholders, they rejected. The dissenters then began proceedings in courts, 21 Law. 4 Between May asked value as 27, day prior shareholders' vote approving merger. also obtained services lawyers, other professional services, connection litigation. proceeding finally terminated June 1955, when state court approved settlement agreed parties. 5 deducted fees paid firm, cost legal arising out proceeding, ordinary necessary business expenses 162 Revenue Code 26 U.S.C. 162. disallowed deduction ground that payments were capital expenditures. sued refund District course suit, conceded, held, pre-merger determination non-deductible outlay. But Court costs related post-merger itself deductible. 285 F.Supp. 617 (D.C.N.D.Ill.1968). Appeals affirmed, 410 F.2d 194 (C.A.7th Cir.), we granted certiorari, 396 954, 426, 24 419 (1969). We reverse. 6 recognized acquiring assets are expenditures purposes. However, believed 'primary purpose' test Rassenfoss 158 764 Cir. 1946), should applied whether sufficiently or acquisition. Noting 'the consummation nor did it function primarily permit acquisition objecting holders' shares,' found paramount purpose stockholders' Waldorf.' F.2d, at 197. 7 As Woodward, supra arise asset expenses, quite apart from taxpayer's incurring them defense perfection title property. chief distinction Woodward law dissenters' passed soon formally registered dissent, placing relationship creditors company stock,1 whereas Iowa passage delayed until after price settled proceeding.2 8 without difference. functional nature remedy forced purchase same, passes before determined. Determination no less an element than both case, incurred determining what be, rather negotiation. whole process required operations—fixing price, conveying property—and cannot see why order those operations occurred applicable make any difference characterization particular federal purposes involved here. 9 argues considered own expenditures, since acquired (on 28) 31). argument carry too far. It true corporation merged never Waldorf; assumed all Waldorf's debts agreement, settled. If minority interest transaction Hilton's, Hilton's itself, well fixing lose character expenditure Hilton's. concedes part. inherited through so expenditues amount debts. 10 short, distinctions urged availing. judgment reversed, remanded directions dismiss complaint. 11 ordered. 12 Reversed remanded. Section 91, subd. Law provides corporate becomes effective upon filing certificate. 21, 6, same time shareholder loses rights such, except right receive his shares. 491.25 (1966) majority shareholders voting renewal 'shall have three years date such action taken pay against * *.' There intimation statute cases construing cited petitioners supra, actual

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