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in resolving the dispute between Feigan and Rappaport when the
deal failed.
The loss which Kanter sustained resulted from his desire to
protect his personal relationship with his friends Feigan and
Rappaport and was not an ordinary or necessary expense of his
legal practice or to protect his business reputation because no
business of his own was conducted or consummated by this
transaction.
Respondent correctly contends that Kanter's payment of
amounts to settle a putative dispute had no relation to his legal
practice. Kanter's involvement constituted personal rather than
professional conduct, and, thus, the expenditure is
nondeductible. Kanter had no money invested in the deal. He
merely acted as a broker for his clients, who were also his
friends. He was clearly not engaged in a separate business of
selling artwork. See McDonald v. Commissioner, 592 F.2d 635 (2d
Cir. 1978).
In Cochrane v. Commissioner, 23 B.T.A. 202 (1931), cited by
Kanter, the attorney who reimbursed his clients had provided
legal services to them. By contrast, Kanter did not perform any
legal services in connection with the Feigan venture. The only
proof that he made the payment to protect himself from a possible
lawsuit and the exposure of litigation was his own self-serving
and uncorroborated testimony.
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