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activities. See, e.g., Hahn v, Commissioner, T.C. Memo. 1976-113
(allowing a deduction for legal fees relating to obtaining
possession of, and participation of income from, a business
already owned by the taxpayer). While the protective order was
in place, employees were fired, the corporations' creditors were
not paid, and services were not performed. In addition, the
corporations could not pay creditors without the divorce court's
permission. Thus, the corporations' profit-seeking activities
were curtailed. See, e.g., Dolese v. United States, 605 F.2d
1146, 1152 (10th Cir. 1979) (holding that legal expenses of a
corporation arising out of a divorce proceeding between the
shareholder-owner and his wife were deductible, to the extent
that the costs were incurred to resist actions that interfered
with the business activities of the corporation). Accordingly,
Mr. Poulos is entitled to deductions, including pass-through
deductions, for the portion of the legal fees relating to the
protective order (i.e., $44,500 for 1991 and $17,300 for 1992).
Liberty, however, is not entitled to deduct any of its alleged
legal expenses because it has not established that it paid such
expenses.
To reflect the foregoing,
Decisions will be entered
under Rule 155.
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Last modified: May 25, 2011