- 74 -
of NITCO.18 The legal expenses incurred in the constitutional
challenge action are thus not deductible by NITCO under section
162. United States v. Gilmore, supra; Kornhauser v. United
States, supra.
Similarly, petitioners have failed to establish that the RSA
#1, Dial One Mobile, Dial One USA, Sprint contract, and Postal
Service investigation matters arose in connection with or
proximately resulted from a business activity of NITCO. With
respect to the RSA #1 venture, Mr. Mussman's intention and plan
was to have the cellular license rights that were obtained
transferred to Serv-U-Cellular, a corporation that he and one or
more of his sons, individually, would own. Much of this plan was
then implemented with Serv-U-Cellular, rather than NITCO,
becoming a partner in the RSA #1 limited partnership. NITCO
reported on its return substantially all the $750,000 paid to
Serv-U-Cellular only after Mr. Mussman was forced to abandon the
plan as a result of the examinations that resulted in
respondent's issuances of the notices of deficiency in the
instant cases. With respect to the Dial One Mobile matters, Dial
One Mobile was a company owned by Rhys that was conducting
activities with respect to cellular telephone systems in
18From petitioners' briefs, we gather that they are not
contending that the claim in the constitutional challenge action
arose in connection with Rhys' alleged desire to purchase shares
of NITCO's stock from Mr. Mussman. As we understand their
contentions, the constitutional challenge action was brought by
Rhys and NITCO in order to challenge the constitutionality of the
FCC's cross-ownership rules, as the constitutional issues could
not be litigated in the divestiture action.
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