- 11 - promote its business interest. Respondent argues that the Fund paid the Defendants’ personal expenses. Petitioner bears the burden of proof. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). We agree with respondent that the contributions are not deductible under section 162(a). Generally, a taxpayer may not deduct an expense of another person, Deputy v. duPont, 308 U.S. 488 (1940); J. Cordon Turnbull, Inc. v. Commissioner, 41 T.C. 358, 378 (1963), affd. 373 F.2d 87 (5th Cir. 1967); Royal Cotton Mill Co. v. Commissioner, 29 T.C. 761, 788 (1958), and may not deduct expenses which are personal in nature, sec. 262; Johnson v. Commissioner, 72 T.C. 340, 348 (1979). An exception is found where the taxpayer pays for legal services rendered to another person, in order to protect or promote the taxpayer’s business interests. Commissioner v. Tellier, 383 U.S. 687 (1966) (corporation could deduct legal fees of another when the related litigation threatened the corporation’s existence); Commissioner v. Heininger, 320 U.S. 467, 475 (1943); Gould v. Commissioner, 64 T.C. 132, 134-135 (1975); Lorhrke v. Commissioner, 48 T.C. 679, 684-685 (1967); Pepper v. Commissioner, 36 T.C. 886, 895 (1961); Catholic News Publishing Co. v. Commissioner, 10 T.C. 73, 77 (1948). The origin of the claim that gave rise to the legal fees, rather than the consequences of the underlying action, must be evaluated toPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011