Tax Court Refuses to Follow 9th Circuit, Says § 162(k) Precludes Deduction for Payment Made to ESOP for Stock Redemption

The Tax Court yesterday refused to follow the Ninth Circuit's decision in Boise Cascade Corp. v. United States, 329 F.3d 751 (9th Cir. 2003), holding that § 162(k) precludes a deduction for Ralston Purina Co.'s payment to its ESOP in redemption of its preferred stock, where the proceeds were distributed to employees terminating their participation in the plan.  Ralston Purina Co. v. Commissioner, 131 T.C. No. 4 (Sept. 10, 2008).  Two district courts have followed the Ninth Circuit's opinion in Boise Cascade (Conopco, Inc. v. United States, No. 2:2004cv06025 (D.C. N.J. Dec. 8, 2004); General Mills, Inc. v. United States, No. 06-3547 (D. Minn. Jan. 14, 2008)), and those cases are on appeal in the Third and Eighth Circuits, respectively.