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The taxpayer incurred legal expenses in defending the criminal
charges, which were later dropped. Additionally, on the advice
of his attorneys, the taxpayer paid a specific amount to the
applicant and her husband in release of any potential claim of
civil liability in connection with the aforementioned series of
events.
In holding that the taxpayer's legal expenses, as well as
the settlement amount paid to the applicant and her husband, were
deductible by the taxpayer as ordinary and necessary business
expenses, the Court stated:
We think it clear that both matters proximately
resulted from petitioner's business as a branch
manager, whose duties included interviewing prospective
outside subscription solicitors, and, if such prospects
were married women, to interview their husbands with
the purpose of finding out whether the husbands
approved such employment for their wives. Petitioner
placed himself in jeopardy by pursuing a proper
business objective, i.e., visiting the home of the
prospective employee and her husband in order to
interview the husband with the objective already
described. * * * [Clark v. Commissioner, supra at
1335.]
In Clark v. Commissioner, supra, the Court held that the action
giving rise to the claims against the taxpayer were carried out
by the taxpayer in the course and scope of his employment and for
a legitimate business purpose. In the instant case, there are
attendant facts that did not exist in Clark, satisfying this
Court that the actions giving rise to Ms. Doe's claim of sexual
assault were carried out by petitioner not within the course of
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