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 which
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