15 Petitioners have introduced evidence that there would have been injurious consequences to the business reputation of PGWV if the SEC prevailed. Although we are instructed by Boagni v. Commissioner, supra, to consider all the facts and circumstances, we are bound by the rule established by United States v. Gilmore, supra, to look to the origin of the underlying claim, and not the consequences. The origin of the claim herein was not in the trade or business of PGWV, but rather in Peters' separate activities. The legal expenses were incurred defending a claim which had its origin in a transaction that was not part of PGWV's business and which benefited Peters personally. We find that the claim did not arise in the trade or business of PGWV, and therefore the amounts in question are not deductible as legal fees by PGWV under section 162(a). To this extent, respondent's determination is sustained. 2. Deductibility of the Fees by PGWV as Compensation to Peters Having concluded that the amounts in question are not deductible by PGWV as legal fees, we now consider petitioners' contention that payment of such fees is deductible by PGWV as compensation to Peters.5 Section 162(a)(1) allows a deduction for reasonable salaries or compensation for personal services actually rendered. Such payments are deductible only if they were made with the intention to compensate. Paula Constr. Co. v. 5 This issue was raised by petitioners other than Mr. Peters in this case.Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Next
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