Sealy Corp. v. Commissioner

Sealy Corporation and its subsidiaries, formerly known as The Ohio Mattress Company and subsidiaries (Sealy) appeal the judgment of the tax court in favor of the Commissioner of Internal Revenue (the Commissioner). The tax court held that the professional expenses incurred by Sealy in complying with the Securities and Exchange Act of 1934 (the 1934 Act), the Employee Retirement Income Security Act of 1974 (ERISA) and an Internal Revenue Service (IRS) audit were not specified liability losses eligible for a ten year carryback under the Internal Revenue Code § 172(f)(1)(B) (1996). In this case of first impression, we affirm the judgment of the tax court.

FACTS AND PROCEEDINGS

Prior to 1970 Sealy was privately owned and not subject to the reporting requirements of the 1934 Act; in 1970 it offered its stock for public sale and became subject to the 1934 Act’s requirements of filing quarterly and annual financial reports. See 15 U.S.C. § 78m. In the taxable years 1989-1992 Sealy incurred expenses of $1,808,309 in obtaining professional services to comply with these requirements. Prior to 1985, Sealy implemented employee benefit plans subject to ERISA, which required Sealy to use…