Recent Tax Court Decision
- In the recent U.S. Bancorp v. Commissioner decision, the Tax Court denies a deduction claimed by a lessee with respect to amounts paid to a lessor in order to be relieved of obligations under a lease.
Times change. Circumstances change. Business decisions that seemed prudent when made may have to be undone, sometimes at substantial cost. One way to defray a portion of that cost is to deduct it for income tax purposes. A recent decision of the Tax Court reminds us, however, of some of the limits on a taxpayer's ability to claim such a deduction. The decision, U.S. Bancorp v. Commissioner (September 21, 1998), denied a deduction claimed by a lessee with respect to amounts paid to a lessor in order to be relieved of obligations under a lease. Although the lease involved in that decision covered computer equipment, the principals set out by the Court will be of relevance to lessees of real property as well.
