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entities. Petitioner’s defense was no more than an attempt to
preserve the status quo; namely, to defend his business practices
against those allegations and to preserve his already established
position within H.K. Peach. Petitioner did not attempt to create
a separate or distinct asset, produce a significant future
benefit, or acquire a capital asset. See Lychuk v. Commissioner,
supra. To the extent that any benefit was created by virtue of
petitioner’s defending this lawsuit, it appears to us more
immediate than future, in that an imminent harm to petitioner
would ensue if he failed to defend himself in this proceeding.
Respondent relies exclusively on Lin v. Commissioner, T.C.
Memo. 1984-581, to support his assertion that these fees must be
capitalized. There, the legal fees related to two proceedings.
The first proceeding concerned a dispute as to the ownership and
management of two corporations. The second proceeding concerned
a dispute to set aside a deed as fraudulent and void. The Court
concluded that the origin of the claim in the first proceeding
was to “protect or defend * * *[the taxpayers’] proportionate
interest in the ownership of the stock of the corporations”, and
in the second proceeding was to restore and establish the
taxpayers’ right to the ownership of the property in question.
We find Lin distinguishable on its facts and hold that the legal
fees related to Oakland 3 are deductible as ordinary and
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