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were spent by the Fund. As of September 1990, a total of
$1,333,350 had been paid to the Fund by the various corporations.
David Shindel (Mr. Shindel) is a certified public accountant
who was retained by Mr. Klein in 1987, on behalf of MBS and
several of its clients, to review their corporate books and
records for compliance with accounting practice and tax law.
Upon reviewing petitioner's books, Mr. Shindel noticed the Second
Clarksville note. Mr. Shindel brought this note to the attention
of Mr. Mohney, recommending that it be satisfied with accrued
interest. Mr. Shindel also recommended that the “note” on the
Mishawaka property be satisfied with accrued interest. During
1989 and 1990, petitioner paid Mr. Mohney the balance due on the
Mishawaka and Clarksville properties plus accrued interest.
Petitioner deducted $55,000 and $105,000 as interest on its 1990
and 1991 returns respectively.
Mr. Shindel prepared all of petitioner’s Federal tax returns
that are in issue herein.
OPINION
1. Legal Expenses
We must decide whether petitioner may deduct its
contributions to the Fund as ordinary and necessary business
expenses under section 162(a). Petitioner argues that it may.
Petitioner contends that these contributions were tied directly
to its business because the contributions were made to protect or
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