George W. Guill - Page 8

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          and circumstances of the litigation.  See United States v.                   
          Gilmore, supra at 47-49.  The most important factor to consider              
          is the circumstances out of which the litigation arose.  See                 
          Boagni v. Commissioner, 59 T.C. 708 (1973).  In passing on this              
          factor, the fact finder must take into account, among other                  
          things, the allegations set forth in the complaint, the issues               
          which arise from the pleadings, the litigation's background,                 
          nature, and purpose, and the facts surrounding the controversy.              
          See id. at 713.                                                              
               Petitioner's legal costs, which the parties agree are                   
          "ordinary" and "necessary" expenses, bear the required nexus to              
          his sole-proprietor insurance business to meet the requirements              
          for deductibility under section 162(a).  As a matter of fact,                
          petitioner's lawsuit against Academy arose entirely from his                 
          insurance business.  Each cause of action petitioner alleged in              
          the lawsuit was spawned entirely from the fact that, after                   
          Academy fired him, it failed to honor the terms of their working             
          agreement by not paying him the commissions to which he was                  
          entitled under their agreement.  But for the agreement, and the              
          fact that Academy breached the agreement by unilaterally                     
          terminating its obligation to pay commissions to petitioner, the             
          instant lawsuit, as it was framed, would never have arisen, and              
          petitioner would never have incurred (or paid) any of the legal              

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