Gobble Corporation purchased 400 acres in Green City to build a private golf course and residences. The land cost $10,000,000. Gobble planned high quality, large houses that would sell for an average of $700,000.
It believed that the city's general plan allowed for this development. Gobble spent in excess of $1,000,000 in fees to pay architects and civil engineers, and for all necessary environmental studies and approvals. Two years ago, Gobble's development proposal was approved by the city council in a 5 - 4 vote.
Two months after the vote, the membership in the council changed dramatically. The major election issue was growth versus no growth. The city voted strongly for a no growth slate. Given the strong community sentiment, the new city council voted to disregard the earlier vote and alter the city's general plan to prohibit such a large development. They decided to defeat the development proposal.
As a result, Gobble sued the city for unreasonably interpreting its planning documents and reversing its initial approval of the project, all to the grave detriment of Gobble. Litigation has consumed almost two years and cost a total of $500,000.
Gobble's CFO has come to you to help with its tax return preparation. Gobble would like to deduct all the costs incurred in this transaction, including the $ 1,000,000 paid for the land acquisition.
a. What Code section addresses the research question?
b. Does your study of the relevant Code section help you to refine or add to the initial research question(s)?
c. Does the Code adequately address the research question? If so, what are your conclusions, and on what are they based?
d. Are there questions remaining that require further research?