- 14 -
removing him from his position and from stopping the flow of his
earnings or income stream.
By seeking to enforce the ostensible terms with the true
owners, petitioner protected his income earning position and kept
the true owners from asserting their authority in the future.
Petitioner already owned the capital entity (November) that was
permitted to continue the operation of the bingo business. He
did not perfect his ownership in November, and he did not acquire
the lease to either of the locations where the bingo business was
operated. Accordingly, respondent’s reliance on INDOPCO Inc. v.
Commissioner, supra, is in apropos. Petitioner had entered into
an agreement with the Lichtys, et al. for a position where he
would receive $50,000 to $150,000 per annum in exchange for his
services, including serving as a shill or front for the Lichtys.
Under that agreement, petitioner would also have been entitled to
some equity at a future time.6 When the Lichtys attempted to
default on their part of the agreement by attempting to remove
petitioner from his position, he sued. Accordingly, petitioner
did not incur the legal fee to produce a long-term benefit, he
incurred it to protect his existing right to an income stream.
Such expenditures are ordinary and necessary business expenses
6 We note that petitioner’s situation after the settlement
was substantially similar to his situation before. He operated a
bingo business and paid the Lichtys $5,000 before and $5,500 per
month after the settlement. In form and substance nothing else
changed.
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011