Von Hafften v. Commissioner
United States Tax Court
Petitioners incurred and paid legal expenses in connection with the defense of a lawsuit for specific performance, breach of contract, promissory estoppel, and fraud, arising out of the purported sale of petitioners' property. Held, the origin and character of these expenses are capital in nature and, therefore, these expenses are not deductible in the years paid, but serve to increase basis.
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Petitioners incurred and paid legal expenses in connection with the defense of a lawsuit for specific performance, breach of contract, promissory estoppel, and fraud, arising out of the purported sale of petitioners' property. Held, the origin and character of these expenses are capital in nature and, therefore, these expenses are not deductible in the years paid, but serve to increase basis. Woodward v. Commissioner, 397 U.S. 572 (1970); Madden v. Commissioner, 514 F.2d 1149 (9th Cir. 1975), revg. 57 T.C. 513 (1972); Soelling v. Commissioner, 70 T.C. 1052 (1978).
1Opinion of the Court
Forrester, Judge:
Respondent has determined deficiencies in petitioners’ Federal income tax for the calendar years 1975 and 1976 in the respective amounts of $3,840.51 and $3,598.72. Concessions having been made, the sole issue for decision is whether petitioners are entitled to deduct legal expenses incurred in defense of a suit for breach of contract, specific performance, promissory estoppel, and fraud, arising out of a purported sale of petitioners’ property, where the sale is not consummated.
FINDINGS OF FACT
All of the facts have been stipulated and are so found.
Petitioners are husband and…
2Cases cited16 opinions
- United States v. GilmoreSupreme Court of the United States · 1963
- Woodward v. CommissionerSupreme Court of the United States · 1970
- United States v. Hilton Hotels Corp.Supreme Court of the United States · 1970
- Harrison E. Spangler and Myrtle B. Spangler v. Commissioner of Internal RevenueCourt of Appeals for the Ninth Circuit · 1963
- Boagni v. CommissionerUnited States Tax Court · 1973
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3Cited by6 opinions
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- Estate of Kincaid v. CommissionerUnited States Tax Court · 1986
- Harold Levinson Assocs. v. CommissionerUnited States Tax Court · 1997
- Nickell v. CommissionerUnited States Tax Court · 1985
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