Victor M. Bello - Page 17




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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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