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The second issue for decision is whether petitioner is
entitled to deduct the legal expenses of $6,610 as a trade or
business expense. Petitioner did not raise this issue in his
petition, nor did he address it in his posttrial brief. However,
we briefly discuss the issue because the parties addressed it at
trial.
Petitioner testified that all or a portion of the legal
expenses of $6,610 were incurred in connection with the permanent
stipulation he entered into with Ms. Brownell, as discussed
above. Other than this cursory testimony, petitioner provided no
substantiation concerning the nature or the amount of the legal
expenses which he incurred.
Because the permanent stipulation was entered into by
petitioner and Ms. Brownell as a result of their personal
relationship, we conclude that the legal expenses incurred in
connection with the permanent stipulation were nondeductible
personal expenses under section 262(a), rather than trade or
business expenses deductible under section 162(a).
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent.
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