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action for dissolution of TROY-SAK and motion for preliminary
injunction to arrest the development of this proceeding, the
plaintiffs in Oakland 5 sought a court order compelling
petitioner to transfer his partnership interest in TROY-SAK to
them, so as to achieve the termination of the partnership on
their terms.
Under the Lincoln Sav. & Loan Association test, the fees in
Oakland 4 were (1) paid or incurred during 1996, (2) incurred in
connection with carrying on petitioner’s trade or business, (3)
an expense, (4) a necessary expense in that petitioner was
fulfilling his fiduciary duty by bringing the lawsuit, and (5) an
ordinary expense in that breaches of fiduciary duty are not
uncommon in business affairs. Furthermore, the claims in this
proceeding did not have as their origin the creation of a
separate or distinct asset, production of a significant future
benefit, or an acquisition of a capital asset. Petitioner
instead sought to enforce the fulfillment of the fiduciary duty
owed to REH1 by Pomeroy and others. We conclude that the fees
relating to Oakland 4 are deductible under section 162(a).
Further, we find the fees relating to Oakland 5 to have been
(1) paid or incurred during 1996, (2) incurred in connection with
carrying on petitioner’s trade or business of developing real
estate as they relate to his involvement with TROY-SAK, (3) an
expense, (4) a necessary expense in that petitioner was required
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