- 24 - Accordingly, we have difficulty seeing how the expenses of defending against William’s effort to reclaim the Lakeview stock were personal to petitioner rather than an expense of Lakeview. Such is not the case with the Fence Property, however. Although neither party has addressed the issue, we do not believe that Lakeview is entitled to deduct any portion of the legal fees allocable to the defense of William's effort to reclaim his interest in the Fence Property. Pursuant to the Redemption Agreement, petitioner personally purchased William's interest in the Fence Property; it was thus not a corporate asset and Lakeview's expenditures in defense of petitioner's title to it were, strictly speaking, a constructive dividend.8 Petitioner has not provided, and we are unable to discern, any basis for allocating a portion of the legal fees to the Fence Property defense. In any event, the failure to allocate is of little consequence because, as discussed more fully infra, the origin of the claim related to these legal expenses was the process of acquisition of a capital asset, in this instance an interest in the Fence Property. c. Capital versus Ordinary To the extent that the fees are not personal to petitioner 8 Because we conclude, with respect to the claim that the legal expenses were personal, that such expenses either were not personal or were personal because expended in defense of an asset held not by Lakeview but in petitioner's name, we find it unnecessary to address petitioner's argument based on Kopp’s Co. v. Commissioner, 636 F.2d 59 (4th Cir. 1980), that the legal expenses were not personal because Lakeview's assets were directly threatened by the litigation.Page: Previous 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 Next
Last modified: May 25, 2011