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Petitioner made the Payments because the California Court ordered
her to make them. The California Court’s order directing
petitioner to make these Payments came in response to a petition
for equitable allocation and a motion for sanctions filed
separately by the other beneficiaries. That petition and that
motion arose from petitioner’s Objections to the Third Account.
We do not continue to follow the steps all the way back to L.O.
Ivey’s will, establishing the Trust. See Boagni v. Commissioner,
59 T.C. 708, 713 (1973). Rather, we look for “‘the kind of
transaction out of which the obligation arose’”. United States
v. Gilmore, 372 U.S. at 48 (quoting Deputy v. du Pont, 308 U.S.
488, 494 (1940)).
After examining the record in the instant case we conclude,
and we have found, that petitioner’s obligation to make the
Payments arose from the Trustee’s filing of the Third Account.
The context of the Third Account is distributions from the Trust.
The distributions to petitioner arose from her status as an
income beneficiary. Thus, after examining the origin and
character of the claim in the instant case, we conclude that
petitioner made the Payments in her personality of a “seeker
after profit”, United State v. Gilmore, 372 U.S. at 44, and
petitioner’s entitlement to deductions therefor is not barred by
section 262(a).
Respondent contends as follows:
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