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Amy is unsuccessful, the legal fees incident to action brought against her ex-husband is

also deductible. For Al, because the origin of the claim which he is defending arose out of

a marital relationship and not profit-seeking activity, the legal fees he incurs in this

defense are not deductible.

SUPPORTElsie B. Gale, 13 T.C. 661 (1949) provides a blueprint in determining the

deductibility of legal fees for Amy. In October of 1943, Elsie B. Gale applied to the

Supreme Court of the State of New York to modify her final judgment of divorce,

seeking an increase in alimony payment. This court granted the modification of the

decree she sought, awarding her more alimony as she hoped. In 1944 she paid $4,000 in

legal fees to Ernst, Gale, Bernays, Falk & Eisner for the services provided in connection

with her application to the Supreme Court of New York. She took a deduction for the

legal fees she incurred. The Internal Revenue Service disallowed the deduction,

concluding that her expenses stemmed from a marital relationship, not a business. Gale

maintained her right to deduct those fees under Section 23(a)(2), (now Section 212 of the

Internal Revenue Code of 1986, as amended) which reads Nontrade or Nonbusiness

Expenses.-In the case of an individual, all the ordinary or necessary expenses paid or

incurred during the taxable year for the production or collection of income, or for the

management , conservation, or maintenance of property held for the production of

income. The Tax Court concluded that she complied with Section 23(a)(2). The Tax

Court believed Gale couldnt have received that additional alimony awarded through the

Supreme Court of New York without actually bringing suit. Thus, the Tax Court held that

the legal fees incident to the legal action were necessary for the production and

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collection of income within the statue. Moreover, the Court held that the legal action was

ordinary because it was an appropriate way of securing additional alimony.

This case is similar to the case before us with Al and Amy. If Amy is successful

in her endeavor to acquire a larger alimony payment from Al, then the additional taxable

income that is produced can be attributed to the legal proceedings she brought against Al.

The legal fees required for the legal proceedings that produced income are then tax

deductible.

Moreover,Ahsan Mohiuddin, T.C. Memo 1996-422 provides an answer to

whether Amy can deduct the legal fees incident to her endeavor regardless of the

outcome of the case. Mohiuddin was an unemployed engineer who sued the state of

Alabama because it denied him unemployment insurance and was unsuccessful. The Tax

Court ruled that he was allowed to deduct the legal fees that arose from that litigation,

which aimed to produce income for him.

To address Als issue, a case to consider is Gilmore. United States v. Gilmore,

372 U.S. 39 (1963) is a landmark case that introduced the origin of the claim test. The

Supreme Court held that the origin of a claim determines whether legal expenses are

deductible personal expenses, not the outcome of the decision. Gilmores ex-wife

claimed more than one-half interest in his controlling stock interest of three franchised

General Motors dealerships as her community property. Gilmore fought the claim,

fearing loss of the controlling stock interest would jeopardize his job as president and

general manager of the corporations. Moreover, the damage to his reputation might have

resulted in General Motors cancelling his dealer franchise. The Supreme Court held that

the tax character of the costs to resist a claim depends on whether the claim arises in

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connection with the taxpayers profit-seeking activities. It does not depend on the

consequences that might result from failure to defeat a claim. The origin of the claim in

Gilmore was personal and not connected to profit-seeking activities, since the claim to

the taxpayers controlling stock interest arose from a divorce proceeding, which is

personal. The ruling in Gilmore does not support the deductibility of legal fees Al incurs

in defending his lawsuit. The origin of the claim to additional alimony from Al is not

connected to Als profit-seeking activities, as it initially stems from a divorce action,

which is personal.

Another case that provides information pertaining to the deductibility of Als

legal fees is Meyer J. Fleischman 45 T.C. 439 (1936). InFleischman, the Tax Court ruled

that legal fees incurred in successfully defeating a lawsuit to set aside an ante-nuptial

property agreement are non-deductible. Fleischman entered into an agreement with his

future wife which limited the wifes claim against the husband in the event of a divorce,

annulment or separation. The wife filed a lawsuit to have the agreement set aside when

she also filed for divorce. Relying on Gilmore andPatrick, the Tax Court ruled that the

legal fees for Fleischman were non-deductible because it arose out of the marital

relationship. The Tax Court reasoned there would not have been an ante-nuptial

agreement but for the marital relationship, and the lawsuit arose because of that

agreement, making the origin personal. Therefore, the decision inFleischman clarifies

the non-deductibility of legal fees in defending claims where the origin is personal. In

Als case, the origin of the claim hes defending is personal, so Fleischman does not

support his taking a deduction.

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In U.S. v. Patrick, 372 U.S. 53 (1963), the Supreme Court ruled that legal

expenses connected with property settlement involved in a divorce are not deductible.

After a property settlement involving exchange of controlling interest in a publishing

company for other property, the taxpayer deducted the portion of his and his wifes legal

fees allocated to the property settlement. The Supreme Court ruled that the wifes claims

arose out of the marital relationship, a product of the taxpayers family life, and not

profit-seeking activity. This case also does not support Al taking a deduction, given that

the claim to additional alimony arose out of a divorce proceeding, which arose out of a

marital relationship, something that is not a profit-seeking activity.