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were real property taxes imposed on the Flamingo Beaches lots.
In addition, the record includes a number of 1993 real property
tax bills or statements that the Municipality of Salvador had
issued with respect to the Flamingo Beaches lots. Finally, with
respect to the wages of $48,880 claimed for 1992, petitioner
testified that he paid this amount to satisfy the wage and other
compensation-related claims of his former hotel employees.
Indeed, a report prepared by Ms. Oliveira lists 10 lawsuits that
had been brought by these former employees.
We are also satisfied that the wage payments were not
capital expenditures. The wage claims had arisen in connection
with petitioner’s normal operation of his hotel and not in
connection with his acquisition or disposition of a capital
asset. See BHA Enters., Inc. v. Commissioner, supra at 601. We
also reject respondent’s suggestion that the settlement payments
constitute capital expenditures because petitioner, in these
disputes, was defending his title to the hotel property. While
any judgments these former employees obtained might have caused a
lien to attach to the hotel property, these settlement costs need
not be capitalized where the hotel business was the source of the
litigation. See id. at 600-601.
Accordingly, we hold that petitioner is entitled to deduct
under section 162: (1) For 1992, security services of $12,000,
wages of $48,880, and tax expenses of $18,000; (2) for 1993,
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