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he was entitled to the moneys from Seawall; indeed, he seems to
concede as much. Petitioner testified that he did not want the
moneys distributed to him, because he feared that he would spend
them. We conclude that the $100,000 paid to Mrs. Stotis, the
$100,000 paid to Maria, and the $97,500 paid to Evanthia
constitute taxable gain to petitioner on the sale of petitioner's
leasehold interest in rooms 103 and 141.
Respondent determined that the $2,500 payment to petitioner,
which Spyropoulos held in escrow, is taxable to petitioner. We
agree. The moneys were available to petitioner when he satisfied
the escrow provisions.
Respondent determined that the $22,500 disbursed by Seawall
to Spyropoulos for legal fees and expenses is taxable to
petitioner. We agree. Where a third party pays the expense of a
taxpayer, the payments are treated as income to the taxpayer
unless they can be shown to be loans or other nontaxable items.
Old Colony Trust Co. v. Commissioner, 279 U.S. 716, 729 (1929);
O'Malley v. Commissioner, 91 T.C. 352, 358 (1988). Petitioner
does not argue that the funds paid to Spyropoulos on his behalf
are exempt from petitioners' gross income. Rather, petitioner
argues that the fee paid to Spyropoulos should be offset against
the gain realized from the sale of his leasehold interest.
In general, the deductibility of a legal expense depends
upon the purpose for which the expense was incurred. United
States v. Gilmore, 372 U.S. 39, 48-49 (1963); Lykes v. United
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