24
which the litigation arose. Boagni v. Commissioner, supra at
713.
Respondent argues that the legal fees relating to
petitioner's bankruptcy were nondeductible personal expenses.
Sec. 262. Respondent also argues that petitioners may not deduct
attorney's fees related to the adversary proceeding because they
involved a challenge to petitioner's discharge for alleged
prepetition fraudulent conveyances. See In re Collins, 26 F.3d
116 (11th Cir. 1994). In Collins, the U.S. Court of Appeals for
the Eleventh Circuit held that a debtor could not deduct a
settlement payment and attorney fees resulting from a bankruptcy
trustee's challenge to the debtor's prepetition transfers to a
family trust in connection with the debtor's prior bankruptcy
case because the payments did not arise from the debtor's
income-producing activities.
We disagree with respondent's contention that Collins
controls here. The origin of the claim is not necessarily
established by allegations made to support a claim. Peters,
Gamm, West & Vincent, Inc. v. Commissioner, T.C. Memo. 1996-186.
The origin of the claim in this case was petitioner's liability
for the debts of Northeast, not the allegation that petitioner
committed fraud. Unlike the taxpayer in Collins, petitioner paid
the legal fees in dispute to defend against the claims of his
creditors in the Northeast litigation who opposed his discharge
in bankruptcy; as discussed above at paragraph II-A-3, the claims
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