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position has not been discussed on brief and is clearly
erroneous.”).
Section 461(f) allows a deduction only if four elements are
present: (1) The taxpayer must contest an asserted liability,
(2) the taxpayer must transfer money or property to provide for
the satisfaction of the asserted liability, (3) the contest must
continue after the transfer, and (4) a deduction would be allowed
for the transfer under applicable law if the liability were not
contested.
In his supplemental brief, respondent concedes that
petitioner is entitled to a deduction in 1992 under section
461(f) for the amount of legal fees claimed by Lurie & Zepeda in
connection with the United Ready Mixed litigation. Respondent
argues, however, that the United Ready Mixed settlement proceeds
substantially exceed the fees to which Lurie & Zepeda were
entitled in connection with the United Ready Mixed litigation,
and that petitioner failed to prove that he would have been
entitled to a deduction if he had paid the balance of the fees
claimed by Lurie & Zepeda for other legal matters they handled
for him.
There are significant gaps in the record. The record shows
that petitioner owed Lurie & Zepeda $348,114.21 in hourly legal
fees and costs as of November 30, 1992, in connection with the
United Ready Mixed matter, $65,685.34 in legal fees and costs as
of 1995 in connection with petitioner’s divorce (the amount owing
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