The IRS determined that transaction termination payments are Section 165 losses and not Section 162 business expenses. Applying Section 1234, the IRS Office of Chief Counsel determined that a taxpayer must recharacterize a loss under Section 165 for termination fees as a capital loss. The IRS conclusion that Section 1234A applies to all transaction-related expenses conflicts with views held by some practitioners, who note that transaction costs are typically paid for services rendered in connection with the abandoned transaction, and not a right or obligation with respect to property. This CCA shows that the IRS is heavily scrutinizing the deductibility...