George W. Guill - Page 2

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               actual damages.  R asserts that the remaining legal                     
               costs are a nonbusiness itemized deduction because they                 
               are attributable to P's recovery of the punitive                        
               damages.  P and R agree that the punitive damages are                   
               includable in P's business income if the legal costs                    
               are a business expense.                                                 
                    Held:  All of the legal costs are attributable to                  
               P's trade or business; hence, the legal costs are all                   
               deductible on Schedule C as a business expense.                         

               Bobby Wayne Enlow, for petitioner.                                      
               Jeanne Gramling, for respondent.                                        


               LARO, Judge:  This case is before the Court fully                       
          stipulated.  See Rule 122.  George W. Guill petitioned the Court             
          to redetermine deficiencies of $100,916 and $434 in his 1992 and             
          1993 Federal income tax, respectively.  Following the parties'               
          concessions, the primary issue left to decide is whether all of              
          the attorney's fees and court costs (collectively, legal costs)              
          paid by petitioner in the successful prosecution of his claim of             
          conversion are expenses of his sole-proprietor business;                     
          petitioner was awarded actual damages, punitive damages, costs,              
          and interest.  We hold they are.  Section references are to the              
          Internal Revenue Code in effect for 1992.  Rule references are to            
          the Tax Court Rules of Practice and Procedure.  Dollar amounts               
          are rounded to the nearest dollar.                                           

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