Dennis W. Stark - Page 19



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          and a taxpayer claiming a deduction bears the burden of clearly             
          showing that the terms of the applicable statute have been                  
          satisfied.  INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84                  
          (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435 (1934).             
          On this record, we do not believe petitioner has demonstrated               
          that Lakeview paid $75,000 for rent in 1992, and we accordingly             
          sustain respondent's determination to disallow this amount.                 
          3. Legal Expenses                                                           
               a. Background--Origin of the Claim Test                                
               Respondent argues that Lakeview is not entitled to deduct              
          $93,491 in claimed legal expenses incurred in connection with the           
          lawsuit brought by William because the lawsuit constituted a                
          personal dispute between William and petitioner.  Thus,                     
          respondent contends, under the "origin of the claim" test of                
          United States v. Gilmore, 372 U.S. 39 (1963), the legal expenses            
          were personal to petitioner and may not be deducted by Lakeview.            
          Alternatively, respondent argues that to the extent any of the              
          expenses are found not to be personal to petitioner but                     
          attributable to Lakeview, they must be capitalized because "they            
          are not proximately related to the trade or business conducted by           
          Lakeview * * * but rather related to the control of the                     
          corporation."                                                               
               Petitioner likewise employs the "origin of the claim" test,            
          and argues against capitalization of the legal expenses on the              
          grounds that they were expended to defend against an attack on              
          the business, that was "in essence a hostile takeover attempt",             



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