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expense incurred by petitioner in closing his business. It has
long been established that the cost of dissolution and
termination of a business constitutes "an everyday happening in
the business world, and in this sense it is quite an ordinary
affair under the test of the Welch case [Welch v. Helvering, 290
U.S. 111 (1933), defining what constitutes an "ordinary" and
"necessary" business expense]" and is therefore deductible when
"directly connected with, or, as otherwise stated
* * * proximately resulted from the taxpayer's business."
Pacific Coast Biscuit Co. v. Commissioner, 32 B.T.A. 39, 43
(1935).
There is no dispute that petitioner ceased to operate his
business and that he retired from the practice of law in 1993.
There is also no dispute that the expenditure was directly
connected with petitioner's business, nor that the cost was
necessary in the course of petitioner's business. Under the
facts of this case, as an attorney ceasing to practice law, it
was also "ordinary" for petitioner to purchase nonpracticing
malpractice insurance upon ceasing to practice law. Welch v.
Helvering, 290 U.S. 111, 113-115 (1933). Thus, if the Policy is
not a capital asset, petitioners would be entitled to deduct its
cost as an ordinary and necessary closing expense in 1993.
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