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failed to meet his burden of proof. We sustain respondent's
determination on this issue.
With regard to the disallowed $108,037 legal expenses
claimed for 1987, legal expenses that arise from personal,
nonbusiness matters of a taxpayer do not qualify as business
expense deductions. Commissioner v. Tellier, 383 U.S. 687, 689
(1966); United States v. Gilmore, 372 U.S. 39, 46 (1963); In re
Collins, 26 F.3d 116, 117-118 (11th Cir. 1994).
Petitioner’s $108,037 in legal expenses that were incurred
in 1987 relates to claims instituted against petitioner by the
SIPC trustee and involves petitioner’s activities as president of
GSC and as a fund raiser and purchaser of securities for GSC and
for others.
Respondent argues that the legal expenses should be
disallowed because they relate primarily to petitioner’s alleged
misappropriation of managed account funds. We disagree. See
Commissioner v. Tellier, supra at 688-693. Authority cited by
respondent involves taxpayers subject to criminal charges
unrelated to their business activities. We conclude that the
claimed $108,037 in legal expenses is allowable as a business
expense to petitioner.
Negligence, Substantial Understatement, and
Failure to Timely File Additions to Tax -- 1987
A taxpayer may avoid liability for additions to tax for
negligence under section 6653(a)(1) if a taxpayer reasonably
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