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the instant cases, application of the Gilmore origin-of-the-claim
test is crucial because NITCO, while a corporation, engaged in
various activities, some of which were business activities and
others of which were nonbusiness activities. See Accardo v.
Commissioner, 942 F.2d 444, 449-451 (7th Cir. 1991), affg. 94
T.C. 96, 99-100 (1990)
Implicit in the Gilmore test is the further requirement
that, for an expenditure to be deductible under section 162, it
must be an ordinary and necessary expense, directly connected
with or proximately resulting from the taxpayer's business.
Kornhauser v. United States, 276 U.S. 145, 153 (1928).
Petitioners contend that the disputed legal expenses NITCO
incurred and paid, during the years in issue, are deductible
ordinary and necessary business expenses under section 162. They
argue that the litigation expenses with respect to the
constitutional challenge, enforcement, and divestiture actions
are deductible, because NITCO was a named party in the proceeding
before the FCC, was the subject of the FCC's divestiture order,
and was faced with the prospect of being fined or otherwise
sanctioned by the FCC.
Respondent, on the other hand, contends that the disputed
legal expenses are not deductible, because they fail to meet the
Gilmore origin-of-the-claim test. Respondent maintains that the
claims in the constitutional challenge, divestiture, and
enforcement actions arose from nonbusiness activities that NITCO
engaged in to benefit Mr. Mussman's son, Rhys, by assisting Rhys'
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