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Here, there is no evidence that the $25,000 check signed by
RoseMary DiFronzo was from any source other than her. There is
also nothing in the record indicating that petitioner paid the
second $50,000. The deposit ticket with its vague notation
(DiFronzo) is not adequate proof that petitioner actually paid
the check in view of our finding that RoseMary DiFronzo made the
$25,000 payment. Accordingly, petitioner has adequately
substantiated only $50,000 of the $125,000 deduction.
2. Deductibility of legal fees
The origin and character of the claim with respect to which
legal fees are incurred controls whether the expense is a
deductible business expense or a nondeductible personal expense.
United States v. Gilmore, 372 U.S. 39, 49 (1963). In
Commissioner v. Tellier, 383 U.S. 687 (1966), the taxpayer
underwrote public stock offerings and bought securities to resell
to customers. He was convicted of violating the fraud section of
the Securities Act of 1933, mail fraud, and conspiracy to violate
those statutes. He spent $22,964 in legal fees during 1956,
which amount he deducted on his income tax return for that year.
Id. at 688. The Supreme Court held that the taxpayer's legal
fees were deductible. "The criminal charges against the
* * * [taxpayer] found their source in his business activities as
a securities dealer. The * * * [taxpayer's] legal fees, paid in
defense against those charges, therefore clearly qualify under
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