In the case of INDOPCO, Inc. v. Commissioner of Internal Revenue (1991), the U.S Supreme Court ruled that expenses incurred by a corporation during a friendly takeover should be capitalized rather than deducted as ordinary and necessary business expenses under section 162(a) of the Internal Revenue Code. The court held that these costs were capital expenditures because they created significant long-term benefits for INDOPCO, Inc., formerly known as National Starch and Chemical Corporation. This decision clarified tax law regarding when corporate expenditures must be capitalized versus when they can be immediately deducted from taxable income.

In the dissenting opinion for INDOPCO, INC. v. COMMISSIONER OF INTERNAL REVENUE, Justice Blackmun argued that the majority's decision to disallow tax deductions for expenses incurred during a friendly takeover was too broad and could potentially affect many other business transactions not related to takeovers. He contended that there is no clear distinction between capital expenditures and deductible business expenses as they both have future benefits. Therefore, he believed it was incorrect to categorize all costs with potential future benefits as capital expenditures which are non-deductible under tax law. Instead of this blanket rule, he suggested an approach where each case should be evaluated individually based on its facts and circumstances in order to determine whether or not a cost is deductible.