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, 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 has 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.
Your supervisor said she is aware of a Tax Court case decided in the 1960s named Willis that may provide some help.
a. Does the case address the research question(s)?
b. Are the facts in the case similar to those of Gobble?
c. As a result of studying the case, do you believe there are additional facts you should seek?
d. Are there questions remaining that require further research?