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question to be answered is, out of what kind of transaction did
the litigation arise. Boagni v. Commissioner, supra.
The facts surrounding the litigation between petitioner and
Elmer's heirs are not in dispute. After his brother died,
petitioner took various steps to protect his ownership of Madison
stock and to acquire additional shares of such stock. Elmer's
family resisted petitioner's efforts and filed suit against
petitioner and his son. Petitioner counterclaimed, seeking a
declaration that the attempted redemption from Elmer's estate and
issuance of stock to petitioner were valid and seeking an order
for specific performance of the agreement to sell 600 shares.
Petitioner argues that he undertook the litigation to
protect his position at the Bank. Petitioner points to several
of respondent's revenue rulings holding that litigation expenses
incurred to defend a taxpayer's actions as an employee are
deductible as ordinary and necessary expenses incurred in the
conduct of a trade or business. See Rev. Rul. 74-394, 1974-2
C.B. 40; Rev. Rul. 71-470, 1971-2 C.B. 121. Petitioner contends
the origin of the claim was the heirs' attempt to remove
petitioner from his job at the Bank. Because petitioner filed
his claims in part to protect his employment at the Bank,
petitioner reasons that the legal fees he incurred are currently
deductible. We disagree.
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