P. David Musgrave and Barbara J. Musgrave - Page 20

                                       - 20 -                                         
          the taxpayer provides some rational basis upon which an estimate            
          may be made.  Vanicek v. Commissioner, 85 T.C. 731, 743 (1985).             
               In the instant case, respondent concedes that the S                    
          Corporation paid $34,226 in attorneys' fees during 1990.                    
          Consequently, we only consider whether petitioners have                     
          established that a portion of the attorneys' fees was incurred in           
          defense of the embezzlement suit.  At trial, Mr. Cramer and Mr.             
          Tye, who provided the legal services and billed the attorneys'              
          fees in issue, testified that, in their employment, they worked             
          as a team but out of different offices.  Mr. Cramer and Mr. Tye             
          provided legal services beginning in December 1987, and Mr.                 
          Cramer continued to provide services until the trial of the                 
          instant case.                                                               
               Respondent argues that the embezzlement suit was concluded             
          more than 17 months prior to the S Corporation's 1990 taxable               
          year and that the record does not establish that the attorneys              
          rendered any services in defense of the embezzlement suit during            
          1990, the year during which the attorneys' fees were paid.                  
          Respondent argues that the record, however, does establish that             
          the attorneys performed substantial services in defense of the              
          insurance suit during 1990.                                                 
               Petitioner, however, testified that "the vast majority" of             
          Mr. Cramer's and Mr. Tye's time during the period from 1987 to              
          1990 was related to the embezzlement suit.  Petitioner also                 
          testified that substantial legal fees were paid prior to 1990 but           




Page:  Previous  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  Next

Last modified: May 25, 2011