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is a nondeductible personal expense under section 262(a). We
therefore find that petitioners have failed to substantiate the
amount of deductible expenses, if any, incurred in connection
with this malpractice suit. Sec. 6001; sec. 1.6001-1(a), (e),
Income Tax Regs.
The remainder of the expenses were incurred in connection
with the malicious prosecution suit. Petitioners argue that this
suit is related to petitioner’s former employment with NCSU.
They assert that the underlying criminal charges against
petitioner were brought as part of an ongoing conspiracy to
deprive petitioner of his job. Petitioners, however, have not
offered any credible evidence in support of this assertion. We
have found that petitioners and the Wang family had been personal
friends, and that Mr. Huang and Ms. Wang were together on the
date of the alleged rape and assault because of this friendship.
We accordingly find that the rape and assault charges arose from
the personal relationship between Mr. Huang and Ms. Wang, and
that the malicious prosecution action is likewise personal in
nature. Thus, these legal expenses are nondeductible personal
expenses. Sec. 262(a); United States v. Gilmore, supra.
Pension and Annuity Income
On their 1996 return, petitioners reported taxable pension
and annuity income of $32,397. Respondent determined that
petitioners had additional unreported pension and annuity income
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Last modified: May 25, 2011