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.
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