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We find petitioner’s arguments unpersuasive. Although legal
expenses related to the determination of Federal income taxes are
deductible under section 162, see, e.g., Greene Motor Co. v.
Commissioner, 5 T.C. 314 (1945), and a corporate taxpayer may
deduct its expense of defending against criminal tax charges,
see, e.g., Shapiro v. Commissioner, 278 F.2d 556 (7th Cir. 1960),
affg. International Trading Co. v. Commissioner, T.C. Memo.
1958-104, petitioner has not persuaded us that the legal expenses
in issue stem from a clear, direct, and proximate adverse effect
upon it or its business. Petitioner was not a defendant in the
criminal proceeding, and it was not named in the indictment.
Rather, the indictment and the resulting prosecutions were
limited to Mr. Mohney and the other Defendants. The charges did
not arise from petitioner's business of leasing real property,
and petitioner was not under the threat of criminal prosecution
or forfeiture. See O'Malley v. Commissioner, 91 T.C. 352, 359
(1988); Matula v. Commissioner, 40 T.C. 914, 920 (1963);
Sachs v. Commissioner, 32 T.C. 815, 820 (1959), affd. 277 F.2d
879 (8th Cir. 1960).
While there is a possibility that some of the claimed
expenditures may have had some benefit to petitioner’s business,
petitioner has not shown this to be true. Put simply, petitioner
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