- 10 -
incurred, rather than its potential consequences upon the
fortunes of the taxpayer, is the controlling basic test". Id. at
49.
The "origin-of-the-claim" rule is not "a mechanical search
for the first in the chain of events which led to the litigation
but, rather, requires an examination of all the facts." Boagni
v. Commissioner, 59 T.C. 708, 713 (1973) (fn. ref. omitted). The
question to be answered is, out of what kind of transaction the
claim arose. See id.
When determining the origin of the claim, the Court must
consider the issues, the nature and objectives of the potential
action, the defenses asserted, the purpose for the legal fees,
the background of the claim out of which the dispute arose, and
"all facts pertaining to the controversy." Id. (citing Morgan's
Estate v. Commissioner, 332 F.2d 144, 151 (5th Cir. 1964)); Barr
v. Commissioner, T.C. Memo. 1989-420. The line demarcating
deductible, and nondeductible expenditures is "often shadowy",
and "It would be idle to suggest that all the authorities in this
field can be reconciled." Ruoff v. Commissioner, 30 T.C. 204,
208 (1958), revd. on other grounds 277 F.2d 222 (3d Cir. 1960).
Petitioner argues that if he had obtained certain financial
documents through his lawsuit against the association, he would
then have been in a position to pursue items of income and tax
losses and credits. The relevant question, however, is in
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011