George Page, Transferee v. Commissioner of Internal Revenue

Three corporations, of whose assets Page is the transferee, entered into complete liquidations under 26 U.S.C. § 337 . The corporations incurred brokerage commission expenses in connection with sales of certain real estate. The real estate had been held by the corporations as capital assets. The corporations deducted the brokerage commissions against ordinary income as ordinary and necessary business expenses under 26 U.S.C. § 162 . The Commissioner disallowed these expenses, holding that the expenses should be treated as offsets against the capital gains realized from the sales. The Tax Court, in a memorandum opinion unofficially reported at P-H Memo T.C. par. 74,015 (1974), upheld the Commissioner. We affirm.

Costs incurred in the disposition of capital assets are normally capitalized and are not deductible as ordinary and necessary business expenses. Woodward v. C.I.R., 397 U.S. 572, 575-76 , 90 S.Ct. 1302 , 25 L.Ed.2d 577 (1970). Neither § 337 nor the legislative history behind that statute induce the conclusion that the general rule should not be applied in a 12-month liquidation. Various Courts of Appeals have generally agreed with this conclusion. Of Course, Inc.,…