to provide designs. After Oil Company declared bankruptcy
the architectural firm’s business noticeably decreased. Richard felt the
decline in business was related to the bankruptcy of Oil Company. Richard
convinced his partner to use the accumulated earnings of the firm to repay all
the creditors of Oil Company. Richard has asked you whether his firm can deduct
the expenses of repaying Oil Company’s creditors. After completing your
research explain to Richard why the expenses are or are not deductib le. A
partial list of research sources is as follows:
• Sec. 162
• Thomas H. Welch v. Helvering, 12 AITR 1456, 3 USTC ‘l(1164
(USSC, 1933)
• William A. Thompson, Jr., 1983 PH T.C. Memo ‘l(83,487, 46
TCM 1109
Leave a Reply