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petitioner denied his claim to his 50-percent share of the bad
debt deduction.
Legal Expenses
The differences between and among petitioner, Pomeroy, and
other investors led to a number of lawsuits (lawsuits).
Petitioner personally paid much of the legal fees connected to
the lawsuits, and he now claims that he may deduct these fees as
the ordinary and necessary expenses of his business, purportedly,
the development of industrial real estate. The lawsuits involved
defending petitioner’s business practices, compelling
petitioner’s business associates to account for profits, and
related issues. The lawsuits were handled mainly by the law
firms of Plunkett & Cooney; Williams, Schaefer, Ruby & Williams;
and Jacob & Weingarten.
For 1995, petitioner incurred legal expenses in the
following proceedings which are at issue in this case: (1)
Oakland County Case No. 91-413151-CK (Oakland 1), (2) Oakland
County Case No. 89-367018-CB (Oakland 2), and (3) Oakland County
Case No. 93-455713 CK (Oakland 3). Oakland 1 was a lawsuit by
Arbor against Pomeroy and others, to which petitioner was later
added as a cross-plaintiff. The proceeding essentially involved
claims of diversion of management fees and breach of fiduciary
duty. Oakland 2 was a lawsuit by PCA and Crittenton against
petitioner, Pomeroy, Arbor, and PNC. The proceeding generally
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