- 43 -
payment. We found that, in Hood, the shareholder "had the
wherewithal to pay the legal fees associated with his criminal
defense." We found that "while the incarceration of Mr. Hood
might have caused * * * [the corporation] to cease operations,
petitioners have not shown that * * * [the corporations’s]
failure to pay the legal fees would have led to Mr. Hood’s
incarceration." Id. at 181-182.
There is no evidence in this case to contradict that Norman,
like Mr. Hood, was financially capable of paying the legal fees
associated with his criminal defense. In both cases, the benefit
to the shareholder ("free legal representation for which * * *
[the shareholder] would otherwise have to pay to avoid
incarceration and/or a felony conviction") outweighed any benefit
to the corporation making the payment. Id. at 181.
We, therefore, find that petitioner’s payment of the legal
fees was primarily for Norman’s, not petitioner’s, benefit and,
therefore, is nondeductible by petitioner.
VIII. Accuracy-Related Penalty
Respondent determined a 20-percent accuracy-related penalty
under section 6662(a) and (b)(1) on account of negligence or
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