Northwestern Indiana Telephone Company - Page 77

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            unrelated to NITCO's business.                                                             
                  We previously have held that substantially all these legal                           
            expenses were not deductible under section 162 by NITCO, because                           
            petitioners failed to establish the expenses were deductible                               
            under the Gilmore origin-of-the-claim test.  Most of these legal                           
            expenses were incurred in the constitutional challenge,                                    
            divestiture, and enforcement actions discussed supra.                                      
                  To the extent a substantive difference exists between the                            
            Gilmore origin-of-the-claim test discussed at pages 67-68, supra,                          
            and the analysis for whether a particular payment should be                                
            treated as constructive dividend income, petitioners in the                                
            instant cases have failed to meet their burden in proving that                             
            NITCO's payment of the legal expenses:  (1) Did not primarily                              
            benefit Mr. Mussman's son Rhys, (2) furthered the interest of                              
            NITCO, and (3) was of direct and substantial economic benefit to                           
            NITCO.  Compare Hagaman v. Commissioner, supra, and  Ireland v.                            
            United States, supra, with Parker v. Commissioner, 365 F.2d 792,                           
            801-802 (8th Cir 1966), affg. in part, revg. in part, and                                  
            remanding T.C. Memo. 1965-77.19                                                            


            19In Parker v. Commissioner, 365 F.2d 792, 801-802 (8th Cir.                               
            1966), affg. in part, revg. in part, and remanding Foundation for                          
            Divine Meditation, Inc. v. Commissioner, T.C. Memo. 1965-77, the                           
            founder and head of a religious organization was prosecuted for                            
            contributing to the delinquency of a minor.  Following his                                 
            acquittal, he brought an action for slander.  The religious                                
            organization paid the expenses of both the criminal and civil                              
            actions.  This Court viewed the legal expenses as a personal                               
            expense of the founder and held that their payment by                                      
            the organization represented taxable income to the founder.  In                            
            reversing, the Court of Appeals for the Eighth Circuit stated                              
                                                                         (continued...)                


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