George and Myrsini Stotis - Page 11

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          States, 343 U.S. 118, 123 (1952).  Legal expenses incurred as               
          part of the disposition of a capital asset ordinarily are capital           
          expenditures that are offset against the amount received from the           
          sale of the capital asset.  Issac G. Johnson & Co. v. United                
          States, 149 F.2d 851, 852 (2d Cir. 1945); Gunn v. Commissioner,             
          49 T.C. 38, 51-52 (1967); see also Jasko v. Commissioner, 107               
          T.C. 30 (1996).  Whether an expenditure is capital in nature or             
          deductible under sections 162 or 212 is a question of fact.  Gunn           
          v. Commissioner, supra at 52; Plainfield-Union Water Co. v.                 
          Commissioner, 39 T.C. 333, 337 (1962).                                      
               Petitioner's leasehold interest in rooms 103 and 141 was a             
          capital asset.  Sec. 1221; Commissioner v. McCue Bros. &                    
          Drummond, Inc., 210 F.2d 752, 753 (2d Cir. 1954), affg. 19 T.C.             
          667 (1953); Miller v. Commissioner, 48 T.C. 649, 651-652 (1967);            
          sec. 1.1221-1(a), Income Tax Regs.  Petitioner's sale to Seawall            
          of his leasehold interest constitutes a sale or exchange.  Sec.             
          1241.  Petitioner paid Spyropoulos legal expenses for the sole              
          purpose of disposing of the leasehold interest in rooms 103 and             
          141.  Thus, the legal expenditures of $22,500 are capital                   
          expenditures that are offset against the gain realized by                   
          petitioner.                                                                 
               In exchange for vacating rooms 103 and 141, petitioner                 
          received use of the new apartment rent free for 3 years.  The               
          amount realized from the taxable sale or other disposition of               
          property is the amount of money received plus the fair market               




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