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Goldman sought specific performance, requesting that petitioner
and the Berros be required to deliver the 24.5-percent equity
interest in petitioner at the agreed upon exercise price. He
also sought monetary damages in excess of $3 million.
Petitioner, the Berros, and Goldman reached a settlement in
April 1990. Goldman agreed to release all claims against
petitioner and the Berros and dismiss the litigation with
prejudice. In return, petitioner was required to pay Goldman
$1 million in annual installments of $83,200.
The issue involved in the Goldman litigation was the
ownership of the stock for which Goldman was willing to pay. The
litigation was a suit for specific performance for title to the
stock. The damages were based on the injury Goldman suffered
because he was denied access to the stock. Petitioner and the
Berros protected their ownership of the stock by removing
Goldman's claim through the $1 million settlement. As a whole,
it is clear that the initial litigation was a dispute over title
to 24.5 percent of petitioner's stock. Since the settlement
amount was paid to defend and perfect title to stock, it is a
capital expenditure and thus nondeductible. As indicated in
supra note 2, we are troubled by the question as to whose stock
(petitioner's or the Berros') is involved in light of the
possible contradictory state of the record. But in view of the
explicit statement in the Option Agreement that the optionees
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