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was paid to settle petitioner's two contract claims, and 9 per-
cent was paid to settle his tort claim. We, therefore, conclude
that 9 percent of the legal expenses, or $27,000, is not deduct-
ible. Also, $54,000 of the legal fees, the amount related to
petitioner's two contract claims, is deductible as a miscel-
laneous itemized deduction.
Next, we must decide whether the legal fees allocated to the
sale of petitioner's stock, or $219,000, were properly added to
the basis in petitioner's stock, as argued by petitioner, or
whether the fees are deductible as miscellaneous itemized
deductions, as respondent contends. In litigation involving the
acquisition or disposition of capital assets, the origin and
character of the claim control in deciding whether or not legal
expenses should be capitalized. Woodward v. Commissioner, 397
U.S. 572 (1970). This Court has applied the same rule to cases
involving the defense or perfection of title to property. See
Boagni v. Commissioner, 59 T.C. 708 (1973). Consideration must
be given to the issues involved, the nature and objectives of the
litigation, and the background and the facts surrounding the
controversy. Id. at 713.
Petitioner transferred his Pizza Hut franchises in exchange
for PMI stock because he was under the impression that PMI
possessed the right to issue its stock in a public offering
without restrictions from Pizza Hut. When PepsiCo contested
PMI's public offering, petitioner instituted a lawsuit to enforce
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