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these rights. The litigation involved the transferability of
PMI's stock, thereby implicating the "perfection of title" by
petitioner, and the litigation culminated in the sale of the
stock to PepsiCo. Thus, 73 percent of the legal expenses, or
$219,000 of the $300,000 legal fees paid, was properly included
in the basis of petitioner's stock and treated as an offset
against the sale price. See Reed v. Commissioner, 55 T.C. 32
(1970) (legal expenditures to remove restrictions on the trans-
ferability of a partnership interest are capital in nature).
In addition to the $300,000 of legal fees paid to the
attorneys, petitioner included $500,000 in the basis of his PMI
stock. The $500,000 related to a contingent note, executed by
petitioner, payable to the law firm involved in the litigation.
Payment on the note was contingent upon any future awards from
the PMI litigation.
Generally, a contingent liability may not be added to basis.
Albany Car Wheel Co. v. Commissioner, 40 T.C. 831, 839 (1963),
affd. per curiam 333 F.2d 653 (2d Cir. 1964). Petitioner,
however, relies on Roberts Co. v. Commissioner, a Memorandum
Opinion of this Court dated June 15, 1945, to support his claim
of propriety of this addition to basis. This reliance is
misplaced. The taxpayers in Roberts capitalized contingent
attorney's fees paid for defense of claims against their father's
estate. The fees were paid out of the estate, because the
defense was successful. Thus, the contingency had been met, and
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