Dennis W. Stark - Page 21



                                       - 21 -                                         
          at 51-52.                                                                   
               The "origin of the claim" test is likewise used to determine           
          whether litigation expenses are to be classified as ordinary or             
          capital.  Woodward v. Commissioner, 397 U.S. 572 (1970); United             
          States v. Hilton Hotels Corp., 397 U.S. 580 (1970).                         
               Application of the "origin of the claim" test requires an              
          examination of all the facts and circumstances and focuses on the           
          "kind of transaction" from which the litigation stems.  Boagni v.           
          Commissioner, 59 T.C. 708, 713 (1973).                                      
               b. Personal versus Business Expense                                    
               The lawsuit in which the legal expenses were incurred was              
          brought by William against petitioner, Lakeview, and Lakeview's             
          attorney7 because William believed he had been cheated in the               
          Redemption Agreement and wanted to get back his Lakeview stock              
          and the management role that such ownership entailed, as well as            
          his interest in the Fence Property.  William believed that                  
          petitioner and the corporate attorney had taken advantage of his            
          diminished capacity, caused by a serious heart ailment and                  
          emotional distress, to pressure him into the buyout against his             
          best interests and at an unconscionable price.  William further             
          alleged that he had been improperly pressured into entering the             
          Redemption Agreement due to petitioner's tantrums designed to               
          frustrate business decision-making or to embarrass him in front             


               7 The legal expenses incurred by Lakeview's corporate                  
          attorney in defending against William's lawsuit were not paid by            
          Lakeview and are not at issue in this case.                                 




Page:  Previous  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  30  Next

Last modified: May 25, 2011