-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 NextLast modified: May 25, 2011