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Silver Glen repaid a $49,000 loan to him in which he had no
adjusted basis. This tax reporting does not establish, however,
that petitioner made any economic outlay to Marc.
V. Legal Expenses
Petitioner claims that during 1997 he paid from his personal
assets more than $350,000 of Marc’s expenses. He claims that he
has been able to locate substantiation for only $70,454 of these
expenses; accordingly, he claims basis in Marc for this amount.13
Petitioner bears the burden of proving that he incurred the
claimed expenses, that they were paid to protect or enhance the
value of his investment in Marc, and that they were contributions
to Marc’s capital or loans to Marc. Thomson v. Commissioner,
T.C. Memo. 1983-279, affd. without published opinion 731 F.2d 889
(11th Cir. 1984). Although the record contains evidence that
legal bills aggregating $70,454 were paid during 1997, there is
no evidence that the legal bills were paid by petitioner or on
behalf of Marc.14 The parties have stipulated that the expenses
in question were “recorded by” Silver Glen and “reallocated by
adjusting journal entry” to Marc. Petitioner has offered no
13 Petitioner concedes that he lacks the requisite proof for
the remainder of the alleged legal expenses and is therefore not
entitled to basis with respect thereto.
14 The invoices identify the matters involved only as
“Kaplan v. Brown” and “Philip Wolin Litigation”. The record
contains no explanation as to how such matters might relate to
Marc.
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Last modified: May 25, 2011