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sufficiently related to the protection of Capital Video’s
business. Respondent contends that therefore the legal fees paid
by Capital Video relating to the conspiracy do not qualify as
business deductions of Capital Video. We agree with respondent.
We emphasize that the legal fees in dispute were paid to
cover the legal fees of Guarino in connection with his criminal
conspiracy activities relating to Richichi’s income tax
liabilities. They were not paid as part of the “tribute”
payments to obtain protection from Richichi. There is no
evidence herein that indicates that Richichi would not have
provided the protection to Capital Video if Guarino had not
participated in the conspiracy relating to Richichi’s taxes and
if Capital Video had not paid Guarino’s legal fees. In fact, the
legal fees in dispute were paid by Capital Video years after the
protection was provided by Richichi and years after the
conspiracy between Guarino and Richichi occurred.
Apart from whether the tribute payments made by Capital
Video to Richichi were made to protect the business of Capital
Video, petitioners have not established that Guarino’s
participation in the conspiracy to avoid Richichi’s income taxes
and Capital Video’s payment of the legal fees in dispute had a
sufficient business relationship with the protection or promotion
of Capital Video’s business.
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Last modified: May 25, 2011