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unclear that he did not, and he had the access and ability to do
so. In accordance with the burden of proof we have imposed upon
respondent, and in the absence of circumstances showing that the
Thompsons’ excess interest deduction for 1987 was not engineered
with the collusion of respondent’s counsel, we find that this
benefit was part of the Thompson settlement. We shall add the
$1,624 tax benefit to the denominator of the fraction that will
determine the percentage reduction in Kersting deficiencies to be
afforded all affected taxpayers.
6. The Thompsons’ Attorney’s Fee
Deduction for 1993
On their 1993 tax return, the Thompsons deducted the
additional $51,000 of legal fees paid in that year to DeCastro.
Petitioners maintain that the deduction of legal fees paid to
DeCastro was improper, and that the amounts so deducted should be
included in the Thompson settlement. We disagree.
Section 212(3) allows the deduction of legal fees paid or
incurred “in connection with the determination, collection, or
refund of any tax.” Regulations further provide that “expenses
paid or incurred by a taxpayer for tax counsel or expenses paid
or incurred in connection with the preparation of his tax returns
or in connection with any proceedings involved in determining the
extent of tax liability or in contesting his tax liability are
deductible.” Sec. 1.212-1(l), Income Tax Regs.
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