Problem - After considerable research, Brock and Louise decided to open a well known franchise restaurant, Sammy's Sandwich Shop. Before opening the shop in a nearby strip shopping center, Brock and Louise paid $1,000 to an attorney to incorporate their business as B&L, Inc. They also paid a franchise fee of $20,000 to SSS Franchisor for the right to operate as Sammy's Sandwich Shop. Soon, however, they learned that many Sammy's Sandwich Shop locations across the country were failing. In large measure, these failures were due to difficulties in dealing with the franchisor, SSS Franchisor. Brock and Louise also realized that to be successful, they would need to raise an additional $150,000 of capital. Ultimately, they closed the business and sought a refund of the franchise fee. As SSS Franchisor has repeatedly refused to refund their fee and any legal recourse appears fruitless, Brock and Louise have no hope of any recovery. How should the legal and franchise fees be treated for tax purposes?