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judgment which arose out of the taxpayer’s trade or business is
an ordinary and necessary expense of the trade or business. See
Ostrom v. Commissioner, 77 T.C. 608 (1981). Section 212 is, in
this regard, in pari materia with section 162(a). See Trust of
Bingham v. Commissioner, 325 U.S. at 373. Petitioner’s Payments
of the judgment arose out of petitioner’s profit-seeking section
212 activity. It was ordinary for a person in that situation to
make the Payments, and it was necessary for petitioner to make
the Payments.
We conclude that petitioner’s Payments satisfy the
“ordinary” and “necessary” requirements of section 212.
C. Allocation
Respondent contends that, even if a portion of petitioner’s
Payments satisfies the requirements of section 212(1) or (2)--
Petitioner has presented no evidence which would enable
the Court to allocate the total sanctions claimed between
those amounts which purportedly qualify under Section 212(1)
or (2) and those amounts which are strictly personal and
therefore nondeductible under Section 262(a). Accordingly,
petitioner is entitled to no deduction for the court-imposed
sanctions at issue.
We recently summarized the law in this area as follows:
We recognized that, when appropriate, litigation costs
must be apportioned between business and personal claims,
and that business litigation costs are nondeductible to the
extent that they constitute capital expenditures. See, e.g.
Kurkjian v. Commissioner, 65 T.C. 862 (1976) (deduction
disallowed for portion of attorney’s fees attributable to
personal matters); Buddy Schoellkopf Prods., Inc. v.
Commissioner, 65 T.C. 640, 646-647 (1975) (deduction
disallowed for portion of attorney’s fees attributable to
acquisition of intangible assets); Merians v. Commissioner,
60 T.C. 187 (1973) (deduction disallowed for portion of
attorney’s fees attributable to personal matters); see also
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