-16- 1996, petitioner was engaged in a trade or business of developing industrial real estate. IV. Legal Fees At issue here are professional fees of $770 and $90,392 for 1995, and $57,799 for 1996. These amounts were incurred by petitioner in the course of his participation in several lawsuits in the Oakland County District Court in his capacity as an officer, partner, and/or shareholder of the entities he owned in whole or in part. Petitioner maintains that these amounts are deductible by him under section 162 as the ordinary and necessary business of his trade or business of developing industrial real estate. Alternatively, petitioner asserts, these amounts are deductible under section 212 as expenses attributable to property held for the production of income. Respondent argues that all of these amounts are nondeductible capital expenditures, except for the portion of legal expenses allocable to Oakland 2.5 We agree with petitioner. Section 162(a) allows a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. To qualify as an allowable deduction under section 162(a), an item must (1) be paid or 5 The parties stipulated allocating 50 percent of the $90,392 at issue to Oakland 2.Page: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Next
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