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to defend himself in a lawsuit, and (5) an ordinary expense in
that souring of business relationships between the partners is a
routine business reality. See Commissioner v. Lincoln Sav. &
Loan Association, 403 U.S. 345 (1971). Under these standards, we
find petitioner’s expenses incurred in connection with Oakland 5
deductible because he did not seek to create a separate or
distinct asset, produce a significant future benefit, or acquire
a capital asset in that proceeding. Instead, he was defending
his position as a partner with respect to the contractual
obligations specified in the partnership agreement.
In view of the above, we hold that petitioner may deduct the
legal fees in the amounts of $770 and $90,392 for 1995 and
$57,799 for 1996.
V. Office Expenses
For 1995, petitioner deducted $14,065 of office expenses as
expenses paid in carrying on his trade or business. Petitioner
and some of the Arbor employees worked in the office. Evidence
in the record supports the conclusion that Arbor was an
“umbrella” entity organized to develop and manage industrial real
estate and nursing homes owned by petitioner and his co-
venturers. The office in question was used by petitioner to
house Arbor’s intended business activities. The expenses at
issue are those of Arbor, not those of petitioner. Thus, he
cannot deduct the fees at issue under section 162.
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