- 73 - 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.Page: Previous 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 Next
Last modified: May 25, 2011