Robinson Knife Manufacturing Co. v. Commissioner

CALABRESI, Circuit Judge:

Petitioner-Appellant Robinson Knife Manufacturing Company (“Robinson”) sells kitchen tools labeled with trademarks licensed from third parties to whom Robinson pays royalties. In Robinson’s income tax returns for its taxable years ending March 1, 2003, and February 28, 2004, Robinson deducted these royalty payments as ordinary and necessary business expenses under 26 U.S.C. § 162. The Commissioner disagreed and issued a notice of deficiency stating that, under 26 U.S.C. § 263A, the royalties are required to be capitalized and made part of Robinson’s inventory costs.…