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The sole issue for decision is whether, for 1991 and 1992,
petitioner is entitled to deduct, under section 162(a), as trade
or business expenses, legal expenses incurred in defending a
criminal sexual assault charge against him.
Some of the facts were stipulated, and those facts, with the
annexed exhibits, are so found and are incorporated herein by
reference. At the time the petition was filed, petitioner's
legal residence was Phoenix, Arizona.
During the years at issue, petitioner was employed as the
chief financial officer of Gosnell Builders Corp. (GBC), an
Arizona corporation whose principal business was the ownership
and development of resort properties in Arizona and Southern
California. One of the several upscale golf resorts owned by GBC
in the Phoenix, Arizona, metropolitan area was known as The
Pointe South Mountain Resort (The Pointe).
The incident that gives rise to the issue in this case
occurred on the evening of June 12, 1991, when petitioner and two
other executives of GBC were entertaining two GBC clients at the
Sports Club located at The Pointe. During the course of the
evening, the group consumed a considerable amount of alcoholic
beverages. Petitioner and his group encountered three women, who
were also patrons at the Sports Club and who, themselves, had
imbibed a considerable amount of alcoholic beverages. Petitioner
and his group purchased several rounds of drinks for the women.
In the course of the evening, petitioner paid particular
attention to one of the three women, who is referred to as Jane
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