- 46 -
incurred to recover the Galt loan, the ordinary and necessary
legal expenses incurred in attempting to recover a business debt
may be deductible. See sec. 162(a). On the present record, we
find that the claimed deduction for the legal expenses in ques-
tion was not frivolous, fraudulent, or phony. The record dis-
closes that there was some basis for Mr. Morris' belief that the
Galt loan was a business loan and that the legal expenses in-
curred in attempting to collect that loan were deductible.
Accordingly, we find that there was some basis in fact and law to
claim a deduction for those expenses.
Based on our review of the record before us, we find that
petitioner has failed to prove that there was no basis in fact or
law within the meaning of section 6013(e)(2)(B) for the claimed
deductions for 1987 for a business bad debt and the legal ex-
penses incurred in attempting to recover that debt. We further
find that petitioner failed to show that those deductions are
grossly erroneous items under section 6013(e)(1)(B). Accord-
ingly, we find that petitioner is not entitled to innocent spouse
relief under section 6013(e) with respect to the portion of the
deficiency for 1987 that is attributable to the disallowance of
the deductions in question.34
34 In light of our holding that the claimed deductions for 1987
are not grossly erroneous items under sec. 6013(e)(1)(B), we
shall not address whether petitioner satisfies sec. 6013(e)(1)(C)
and (D) with respect to the portion of the deficiency for 1987
that is attributable to those deductions.
Page: Previous 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 NextLast modified: May 25, 2011