-19-
In contrast, we conclude that petitioner may not deduct her
$275,000 share of the settlement payment. The Government’s
allegations in the farm loan litigation regarding the
circumstances of the transfer of Cook family assets to petitioner
(unlike the allegations relating to Cook Farms) represented a
direct attack on her title to real estate and other assets that
she had acquired in her own name over the years. Consequently,
we conclude that petitioner paid her share of the settlement
payment to preserve or protect her title to real estate and other
personal assets against the Government’s claim that those assets
had been fraudulently conveyed to her. Therefore, petitioner
must capitalize her share of the settlement payment. See Madden
v. Commissioner, 514 F.2d at 1151; Reed v. Commissioner, 55 T.C.
at 39-40.
D. Whether OMCC May Deduct Legal and Professional Fees It Paid
in Connection with the Farm Loan Litigation
OMCC paid $83,202 in legal and professional fees in
connection with the farm loan litigation. Respondent contends
that OMCC may not deduct these legal fees because they were
incurred to defend and protect petitioner’s title to real estate
and, therefore, are capital expenditures.
Our analysis regarding the deductibility of OMCC’s share of
the settlement payment also applies to the legal and professional
fees in dispute. Thus, OMCC may deduct $26,584.16 in legal and
professional fees that it incurred defending against the lawsuit
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011