Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 70-62

1970-1 C.B. 30

IRS Headnote

Attorney fees for obtaining a reduction of an assessment levied against property to pay for local benefits are not business expenses and constitute part of the property's cost for purposes of determining gain or loss; O.D. 739 superseded.

Full Text

Rev. Rul. 70-62 /1/

City X levied an assessment against a vacant lot owned by the taxpayer to pay for local benefits to which section 164(c) of the Internal Revenue Code of 1954 applies. The taxpayer considered the assessment unreasonable and engaged an attorney to secure a reduction in the assessment. The attorney secured a reduction of the assessment and the taxpayer, by previous agreement, paid the attorney for services rendered.

Held, the fee paid by the taxpayer in securing the reduction of the assessment imposed for a local benefit is not a business expense. Since the fee was paid to reduce a necessary capital expenditure in connection with the property against which the assessment was levied, it is a part of such capital expenditure and is to be considered a part of the cost of the property for the purpose of determining gain or loss in event of its sale.

O.D. 739, C.B. 3, 192 (1920), is hereby superseded, since the position stated therein is set forth under the current statute and regulations in this Revenue Ruling.

/1/ Prepared pursuant to Rev. Proc. 67-6, C.B. 1967-1, 576.