- 20 -
the taxpayer provides some rational basis upon which an estimate
may be made. Vanicek v. Commissioner, 85 T.C. 731, 743 (1985).
In the instant case, respondent concedes that the S
Corporation paid $34,226 in attorneys' fees during 1990.
Consequently, we only consider whether petitioners have
established that a portion of the attorneys' fees was incurred in
defense of the embezzlement suit. At trial, Mr. Cramer and Mr.
Tye, who provided the legal services and billed the attorneys'
fees in issue, testified that, in their employment, they worked
as a team but out of different offices. Mr. Cramer and Mr. Tye
provided legal services beginning in December 1987, and Mr.
Cramer continued to provide services until the trial of the
instant case.
Respondent argues that the embezzlement suit was concluded
more than 17 months prior to the S Corporation's 1990 taxable
year and that the record does not establish that the attorneys
rendered any services in defense of the embezzlement suit during
1990, the year during which the attorneys' fees were paid.
Respondent argues that the record, however, does establish that
the attorneys performed substantial services in defense of the
insurance suit during 1990.
Petitioner, however, testified that "the vast majority" of
Mr. Cramer's and Mr. Tye's time during the period from 1987 to
1990 was related to the embezzlement suit. Petitioner also
testified that substantial legal fees were paid prior to 1990 but
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011