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because the expenditures failed to meet the Gilmore origin-of-
the-claim test. We also held that Mr. Mussman had large amounts
of constructive dividend income for 1988 and 1989, including the
1988 and 1989 legal expenses NITCO had paid in litigating the
constitutional challenge, divestiture, and enforcement actions.
Petitioners have failed to establish: (1) NITCO acted
reasonably in claiming deductions for these legal expenses; and
(2) the Mussmans acted reasonably in not reporting NITCO's
payments of the 1988 and 1989 legal expenses as constructive
dividend income to Mr. Mussman. Petitioners imply that the
attorneys’ fees in the constitutional challenge, divestiture, and
enforcement actions were deducted because the outside law firms
had billed their work to NITCO, rather than to Rhys and NICATV.
We are not convinced that NITCO acted reasonably in deducting the
fees it paid merely because the work had been billed to NITCO.
Indeed, in one instance NITCO still claimed a 1989 deduction with
respect to its payment of $2,239.85 to W&C for certain Dial One
Mobile work, even though W&C billed the legal work to Rhys and
not to NITCO. Petitioners have now conceded that the $2,239.85
payment is not deductible by NITCO and was constructive dividend
income to Mr. Mussman.
With respect to the purported advice petitioners received
from the accountant, we are not satisfied that the accountant was
apprised of all the relevant facts, including the fact that the
activities NITCO engaged in with respect to NICATV were not
undertaken by NITCO with a profit motive. See Collins v.
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