Golden Gate University Law Review


In In re Kroy (Europe) Limited,l the Ninth Circuit held that a corporation could amortize and deduct fees which it incurred in borrowing funds used to redeem stock under §162(a) of the Internal Revenue Code. Section 162(a) allows a corporation to deduct ordinary and necessary business expenses. Kroy required the court to decide whether §162(k) of the Internal Revenue Code, an exception to §162(a), applied to these fees and would preclude their deduction. Section 162(k) disallows deduction of any expenses incurred "in connection with" a stock redemption. The Ninth Circuit determined that §162(k) did not apply to the fees because the fees were incurred in a separate borrowing transaction which was not "in connection with" the stock redemption. In its decision, the Ninth Circuit reversed the district court decision and affirmed an earlier bankruptcy court holding.

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