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particular, whether litigation and other legal costs are
classified as deductible business expenses or nondeductible
capital expenditures incurred in acquiring or disposing of an
asset, depends upon the origin of the claims relating to those
legal costs. See Woodward v. Commissioner, supra at 577-578;
Dower v. United States, 668 F.2d 264, 266-268 (7th Cir. 1981);
BHA Enters., Inc. v. Commissioner, 74 T.C. 593, 598-601 (1980).
Petitioner contends that he has largely substantiated his
disputed business expenses.
Respondent, on the other hand, contends that petitioner has
failed to substantiate the claimed expenses and has failed to
establish that certain of those expenses were not capital
expenditures. Respondent notes that capital expenditures include
the cost of defending one’s title to property. See sec.
1.263(a)-2(c), Income Tax Regs.
With respect to petitioner’s claimed deductions for
security, wages, and taxes, we are satisfied petitioner has
adequately substantiated and established those expenses are not
capital expenditures. Petitioner testified that from 1992
through 1994 a security service firm was hired to protect the
premises from squatters after the 12-cabana complex was closed
for business. He said that this firm was paid $1,000 per month
for providing the premises with 24-hour security. Similarly,
petitioner testified that the taxes claimed for 1992 through 1994
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