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Illinois.” Petitioner explained during his testimony that
Inspection was “investigating” his Schedule C gross receipts
related “directly to my practice of law” and to his alleged
practice on government time.
Respondent contends that petitioner’s motivation in making
payments for legal representation is irrelevant; it is the origin
of the claim that is important. The origin of the claim, in
respondent’s view, is in connection with “defending” petitioner’s
employment with the IRS. Respondent points out that such
expenses are deductible on Schedule A as employee business
expenses subject to the 2-percent “floor” of section 67(a). We
agree with respondent.
The Supreme Court, in United States v. Gilmore, 372 U.S. 39
(1963), held that the characterization of legal expenses depends
on the activities from which the claim arises for which the
expenses were incurred. The Court said that “the origin and
character of the claim with respect to which an expense was
incurred, rather than its potential consequences upon the fortunes
of the taxpayer, is the controlling basic test”. Id. at 49.
The “origin-of-the-claim” rule is not “a mechanical search
for the first in the chain of events which led to the litigation
but, rather, requires an examination of all the facts.” Boagni v.
Commissioner, 59 T.C. 708, 713 (1973). The question to be
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