12
Commissioner v. Tellier, 383 U.S. 687 (1966). In Boagni v.
Commissioner, 59 T.C. 708, 713 (1973), we stated:
Quite plainly, the "origin of the claim" rule does
not contemplate a mechanical search for the first in
the chain of events which led to the litigation but,
rather, requires an examination of all the facts. The
inquiry is directed to the ascertainment of the "kind
of transaction" out of which the litigation arose.
Consideration must be given to the issues involved, the
nature and objectives of the litigation, the defenses
asserted, the purpose for which the claimed deductions
were expended, the background of the litigation, and
all the facts pertaining to the controversy.
[Citations and fn. ref. omitted.]
We must identify the claim that gave rise to the legal fees
whose deductibility is here in question, and then determine
whether the claim was proximately related to the trade or
business of PGWV.
In Commissioner v. Heininger, 320 U.S. 467 (1943), a dentist
who sold mail order false teeth was allowed to deduct legal fees
stemming from allegations that he made fraudulent claims
regarding the quality of his product. Finding that there was "no
doubt that the legal expenses of [taxpayer] were directly
connected with 'carrying on' his business," id. at 470, the Court
determined that the expenditures were ordinary and necessary
under section 23(a) of the Revenue Act of 1936, ch. 690, 49 Stat.
1658.4 Commissioner v. Heininger, supra at 471.
In United States v. Gilmore, supra, by contrast, the
taxpayer incurred legal fees in a divorce proceeding brought by
4 This section is essentially the same as present sec.
162(a).
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