Horace D'Angelo - Page 20

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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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