Northwestern Indiana Telephone Company - Page 73

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            that the writeoff was not deductible for tax purposes.17  We                               
            conclude that the activities that NITCO engaged in with respect                            
            to NICATV were nonbusiness activities of NITCO.  See                                       
            International Trading Co. v. Commissioner, 275 F.2d at 584-585.                            
            As the claim in the divestiture and enforcement actions arose in                           
            connection with these nonbusiness activities that NITCO engaged                            
            in with respect to NICATV, the legal expenses of the divestiture                           
            and enforcement actions are not deductible by NITCO under section                          
            162.  See United States v. Gilmore, supra; Accardo v.                                      
            Commissioner, supra; Dower v. United States, 668 F.2d 264, 266                             
            (7th Cir. 1981); Anchor Coupling Co. v. United States, 427 F.2d                            
            429, 431-433 (7th Cir. 1970).  Petitioners have further failed to                          
            establish that the constitutional challenge action arose in                                
            connection with or proximately resulted from a business activity                           



            17At trial, Mr. Mussman claimed that the writeoff occurred                                 
            due to an inadvertent error on the part of NITCO's accountant.                             
            He related that the accountant, unlike Mr. Mussman, did not know                           
            that Rhys had realized sufficient cash from the sale of NICATV to                          
            discharge the "debt".  We find Mr. Mussman's tale of mere                                  
            inadvertence to be incredible and not worthy of belief.  We doubt                          
            that the accountant would write off as uncollectible this large                            
            $122,000 "receivable", without consulting Mr. Mussman and NITCO's                          
            other top management.  Moreover, even if the "receivable" were                             
            inadvertently written off on NITCO's books, this still does not                            
            adequately explain why NITCO never took action to collect the                              
            "debt", as Mr. Mussman knew that Rhys possessed sufficient cash                            
            to discharge the "debt".  Additionally, we are not convinced that                          
            Mr. Mussman was unaware of the accountant's "error".  In signing                           
            NITCO's 1989 annual report to the IURC, Mr. Mussman represented                            
            that the information contained in the report, to the best of his                           
            knowledge, was true and correct under penalty of perjury.  We                              
            think that Mr. Mussman all along never intended that NITCO                                 
            actually be paid by NICATV and Rhys for much of the work and                               
            other assistance that NITCO provided to NICATV.                                            


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