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identified as "William J. Fleischaker, M.D." for which the
principal business was the provision of medical services. The
other business was identified as "Deborah Fleischaker, et. al"
for which the principal business was oil and gas production. On
the Schedules C for oil and gas production activity, petitioners
claimed legal and professional expenses of $439,871 for 1991 and
$51,950 for 1992. None of the claimed legal and professional
expenses were related to the oil and gas production activity.
Except for $11,149 of the fees claimed in 1992, the fees claimed
as legal and professional fees from oil and gas production were
for payments made by petitioner under his guaranty obligations
for Adult Living Center debts and legal fees incurred in
defending against those obligations. The remaining $11,149
claimed in 1992 was related to petitioner's medical services
activity.
In the notice of deficiency, respondent disallowed a
deduction for all $439,871 of legal fees claimed on the 1991
return and $40,801 of the fees claimed in 1992. Respondent did
not disallow the $11,149 of fees claimed as a deduction related
to gas and oil production in 1992 that were related to
petitioner's medical services activity.
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