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was indeed concerned that the State audit and consequences
flowing from the audit could negatively affect her professional
reputation and therefore her Schedule C business. However, we
are bound by the rule established by United States v. Gilmore,
supra, to look to the origin of the underlying claim and not the
consequences. Petitioner’s motives for hiring attorneys and
exploring her legal options simply are not relevant. The origin
of the claim herein was not in the trade or business of SLS but
rather in petitioner’s activities as an employee of UCSF. The
event that caused her to hire attorneys, the State audit of CPRT,
was directly related to her employment as director of CPRT. The
legal expenses were incurred in response to an event that was not
part of SLS’ business, but, rather, was part of petitioner’s
employment. Thus, the fact that the legal services may have
resulted in damage control necessary to fend off disparaging
publicity and salvage petitioner’s Schedule C business
relationships is irrelevant because the State audit, which had
nothing to do with SLS, was the precipitating event.
Petitioners contend that the legal fees were not incurred in
connection with any litigation, but instead they were incurred to
seek advice and counsel. Thus, they argue, it is appropriate to
examine the nature of the taxpayer’s concerns and the reason the
advice is sought. Petitioners cite Ahadpour v. Commissioner,
T.C. Memo. 2000-68, for the proposition that costs associated
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