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activities. An allocation of litigation costs, if and when
applicable, rests on the origin of the claims relating to those
expenses. See Woodward v. Commissioner, 397 U.S. at 577-578;
United States v. Gilmore, 372 U.S. at 44-45; see also Peckham v.
Commissioner, 327 F.2d at 856.
We recognize that, when appropriate, litigation costs must
be apportioned between business and personal claims, and that
business litigation costs are nondeductible to the extent that
they constitute capital expenditures. See, e.g., Kurkjian v.
Commissioner, 65 T.C. 862 (1976) (deduction disallowed for
portion of attorney's fees attributable to personal matters);
Buddy Schoellkopf Prods., Inc. v. Commissioner, 65 T.C. 640, 646-
647 (1975) (deduction disallowed for portion of attorney fees
attributable to acquisition of intangible assets); Merians v.
Commissioner, 60 T.C. 187 (1973) (deduction disallowed for
portion of attorney's fees attributable to personal matters); see
also Boagni v. Commissioner, supra, (recognizing that litigation
costs can be characterized as both deductible and nondeductible
when the litigation is rooted in situations giving rise to both
types of expenditures). This principle of allocation is
inapposite to our decision herein for two main reasons. First,
petitioner's legal costs were all attributable to claims which
originated in his business activity, the primary claim being that
of conversion. Second, in contrast to cases where each of the
underlying claims could have resulted in an award of damages
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