- 15 -
insider information with respect to at least 19 companies. The
five instances of selling insider information to Mr. Lee and Mr.
Cronin as set forth in the criminal charges were separate and
occurred over several months. With respect to the other
instances alleged in the civil and criminal documents, there is
insufficient detail to determine that petitioner's activity was
“frequent, regular, and continuous”.
On the basis of this record, we conclude and hold that
petitioner’s sale of insider trading information was sporadic and
represented a limited opportunistic transactional relationship
with Mr. Lee. Accordingly, petitioner was not in a trade or
business in connection with his insider trading activities.
Petitioner contends that the legal expenses paid for his
defense in civil and/or criminal litigation that arose in
connection with his sale of insider information are deductible
under section 162. Respondent, however, argues that petitioner
is not entitled to a deduction because the legal expenses were
paid by his father. Petitioner maintains that his father lent
him money to pay his legal expenses and argues that he intended
to repay his father as evidenced by promissory notes.
Alternatively, petitioner argues that he is entitled to deduct
the legal fees because his father paid his legal expenses as a
gift to petitioner. Because we have decided that petitioner was
not engaged in a trade or business in connection with his sales
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011