Tax Strategy and Critical Thinking Problem

C:1-61 Your client, Home Products Universal (HPU), distributes home improvement products to independent retailers throughout the country. Its management wants to explore the possibility of opening its own home improvement centers. Accordingly, it commissions a consulting firm to conduct a feasibility study, which ultimately persuades HPU to expand into retail sales. The consulting firm bills HPU $150,000, which HPU deducts on its current year tax return. The IRS disputes the deduction, contending that, because the cost relates to entering a new business, it should be capitalized. HPU's management, on the other hand, firmly believes that, because the cost relates to expanding HPU's existing business, it should be deducted. In contemplating legal action against the IRS, HPU's management considers the state of judicial precedent: The federal court for HPU's district has ruled that the cost of expanding from distribution into retail sales should be capitalized. The appellate court for HPU's circuit has stated in dictum that, although in some circumstances switching from product distribution to product sales entails entering a new trade or business, improving customer access to one's existing products generally does not. The Federal Circuit Court has ruled that wholesale distribution and retail sales, even of the same product, constitute distinct businesses. In a case involving a taxpayer from another circuit, the Tax Court has ruled that such costs invariably should be capitalized. HPU's Chief Financial Officer approaches you with the question, "In which judicial forum should HPU file a lawsuit against the IRS: (1) U.S. district court, (2) the Tax Court, or (3) the U.S. Court of Federal Claims?" What do you tell her?