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and 1993 legal expenses.6 See Rule 142(a).7
Similarly, as to the claimed 1995 legal expense of $100,000,
although petitioner testified this was compensation to Ms.
Oliveira, he failed to explain the specific services Ms. Oliveira
had rendered in exchange for this payment. Ms. Oliveira had been
hired to represent petitioner in resolving his numerous hotel-
related problems, which included a number of legal disputes he
had with third parties. According to petitioner, he had not been
paying Ms. Oliveira her monthly fee of $5,000. Instead, he
decided to give her a house valued at $100,000 in payment for her
past and future services. However, as indicated above, any
compensation for her past services in dealing with petitioner’s
legal disputes might be classified as a capital expenditure,
depending upon the nature and source of the claims in those
disputes. Moreover, any payment petitioner made for services in
future years could also be a capital expenditure. See INDOPCO,
Inc. v. Commissioner, 503 U.S. 79, 87 (1992) (noting that,
although capitalization may not be warranted where there is
merely some incidental future benefit, realization of benefits by
6Furthermore, petitioner claimed that the $24,000 paid to
the architect was for new work in revising the hotel expansion to
be undertaken once petitioner and the construction company
resolved their dispute. If so, that payment would be a capital
expenditure.
7The record reflects that respondent’s examination of
petitioner’s 1992 through 1995 returns was begun well before
1998.
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