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the Oakland 3 proceeding, neither Oakland 1 nor Oakland 2
involved a dispute as to the validity of ownership interests, or
involved a claim to set aside a fraudulent conveyance, as in Lin
where the Court concluded that the origin of the claim was to
protect, defend, or restore the taxpayers’ interest in the stock
of the corporations or in other property. Instead, the claims in
the proceedings at issue can best be characterized as breach of
contract claims. The legal expenses incurred by petitioner to
defend against such claims constitute an ordinary and necessary
expense of conducting petitioner’s trade or business. The
proceedings in which he incurred those expenses did not relate to
protecting, defending, or restoring petitioner’s interests in the
companies he owned.
Respondent also notes that Oakland 2 involved a claim for
failure to make partnership contributions. Citing section 741
and Commissioner v. Shapiro, 125 F.2d 532 (6th Cir. 1942), affg.
a Memorandum Opinion of the Board of Tax Appeals, which allegedly
treat a partnership interest as a capital asset, respondent
concludes that the legal expenses in Oakland 2 must be
capitalized to the extent that they related to an issue of
partnership contribution in that they created or enhanced a
capital asset. Respondent’s references to section 741 and
Shapiro are misplaced. Both authorities deem a partnership
interest a capital asset solely for disposition purposes. By
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