13
his wife, who stood to gain control of his three incorporated
auto dealerships. The taxpayer argued that because he faced
losing control of his corporations, the legal expenses were
incurred in the defense or preservation of income-producing
property. The Court declined to attach controlling importance to
the consequences that the taxpayer faced, but rather examined
whether the claim arose in connection with the taxpayer's profit-
seeking activity. The Court did not allow the deductions because
the wife's claims stemmed from the marital relationship, and not
from any income-producing activity of the taxpayer. United
States v. Gilmore, supra at 51; see Kornhauser v. United States,
supra at 153.
Respondent argues that the origin of the SEC's claim did not
arise from PGWV's trade or business, and that under United States
v. Gilmore, supra, the consequences to PGWV are irrelevant to the
analysis. Respondent also argues that the origin of the claim
was not in PGWV's trade or business because IMG's partnership
agreement specifically excluded the ERG deal, and that Peters'
activities were not a business activity of IMG or PGWV.
Petitioners argue that the alleged claim had its origin in the
trade or business of the firm, which was in the business of
acting as an investment adviser, and therefore deduction of the
legal expenses incurred in defending such action is not barred by
United States v. Gilmore, supra.
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011