Berry Petroleum Co. v. Commissioner
United States Tax Court
A1 owned both A2, a wholly owned subsidiary in the oil and gas business, and 80 percent of the stock of N, another corporation in the oil and gas business. P1, also in the oil and gas business, wished to acquire N. As a first step in the acquisition, P1 offered to buy A1's N stock for $ 5 million.
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A1 owned both A2, a wholly owned subsidiary in the oil and gas business, and 80 percent of the stock of N, another corporation in the oil and gas business. P1, also in the oil and gas business, wished to acquire N. As a first step in the acquisition, P1 offered to buy A1's N stock for $ 5 million. At A1's request, so that A1 would not be required, under the Securities Exchange Act of 1934, ch. 404, sec. 16(b), 48 Stat. 881, 896 (current version at 15 U.S.C. sec. 78p(b) (1988)), to disgorge its short-swing profits from sale of its N stock, P1 paid $ 3.8 million for A1's N stock and an…
1Opinion of the Court
CONTENTS
Page
OVERVIEW OF ISSUES AND CONCLUSIONS. 587
I. GENERAL FINDINGS OF FACT . 588
II. ISSUES 1 AND 2: LOSS CLAIMED ON EXPIRATION OF AFEX OPTION AND DEDUCTIBILITY OF WIEGAND LITIGATION COSTS. 588
A. FINDINGS OF FACT . 588
1. Afex Option . 588
2. Wiegand Litigation. 601
3. Ultimate Findings of Fact . 608
B. OPINION . 609
1. Afex Option . 609
a. Respondent’s Motion To Strike Mr. Hoffman’s Testimony ... 609
b. Disallowance of Loss Claimed on Expiration of Afex Option and Allocation of Ostensible Price of Afex Option to Petitioner’s Cost of Norris Stock . 611
i. Lack of Economic Substance of Afex Option…
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