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the origin of petitioner’s claim is his attempt to gain admission
to the California Bar.
Our holding is supported by United States v. Gilmore, supra.
The issue before the Supreme Court was whether a husband’s legal
expenses in divorce proceedings were deductible. The husband’s
overriding concern in the litigation was: (1) To protect certain
assets, upon which the husband relied for his principal means of
livelihood, from his wife’s claims; and (2) to defend against his
wife’s reputation-damaging charges of marital infidelity which,
if found, might also have adversely affected the husband’s
principal means of livelihood.
In finding that the expenses were not deductible, the
Supreme Court rejected a test that looked to the consequences of
the litigation. Instead of examining the taxpayer’s motives or
purposes for the undertaking the litigation, the Supreme Court
examined the origin and character of the claim. In so doing, the
Supreme Court concluded that the claim arose out of the personal
relationship of marriage, rather than in a business context.
Similarly, under the facts before this Court, while
petitioner’s primary purpose for bringing suit in Bar Court might
have been to protect his job and business reputation, his motives
for initiating the process are not considered. Equally
irrelevant are the consequences the suit may have had on
restoring petitioner’s business reputation, had he prevailed.
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Last modified: May 25, 2011