19 B. Necessary A necessary expense is one that is appropriate or helpful to the taxpayer in his profit-seeking activities. Commissioner v. Heininger, supra at 471. Peters was an investment adviser. The aim of the litigation with the SEC was to revoke his license in such endeavors. We find that the legal expenses were necessary to protect his profit-seeking activities. C. Paid or Incurred During the Tax Year Respondent conceded that legal fees of $128,854.71, $198,431.67, and $135,659.23 were incurred for the tax years 1988 through 1990, respectively, and that PGWV paid them. Respondent disallowed deductions of $123,103, $190,245, and $128,131 for the years 1988 through 1990. We have held that the payment of the legal fees was not deductible as an expense by PGWV under section 162(a). Petitioner argues that the legal fees were constructively paid by him, and refers to Broad v. Commissioner, T.C. Memo. 1990-317, for support. In Broad, a C corporation made payments on a loan that was a personal obligation of one of the shareholders. This Court held that the payment of the loan obligation was a constructive dividend; we then allowed the taxpayer a deduction for the interest on the loan. In other words, we reasoned that because he was treated as having received an amount equal to the loan payment by the bank for him, he should be treated as having paid the interest to the bank whichPage: 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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