Meyer J. Fleischman v. Commissioner 45 T.C. 439 (Tax Ct. 1966) Fleischman got divorced. After the divorce was settled, his ex-wife sued him to try to get the pre-nup invalidated. He spent $3k in legal fees trying to keep his ex-wife from getting his money. When he filed his taxes Fleischman claimed a $3k deduction as an expense related to the production of income. 26 U.S.C. §212(2) allows for deductions related for expenses paid for the management, conservation, or maintenance of property held for the production of income. Fleischman didn't claim a deduction for expenses related to the divorce, only for expenses related to the lawsuit. The IRS denied the deduction. Fleischman appealed. The IRS claimed that the expenses were not deductible because they were "personal, living, and family expenses" and excluded by 26 U.S.C. §262. The Tax Court affirmed. The Tax Court looked to United States v. Gilmore (372 U.S. 39 (1963)) and United States v. Patrick (372 U.S. 53 (1963)), both of which held that §212(2) is not applicable to divorce related expenses. The Tax Court found that if the underlying dispute is personal in nature, then the legal fees are not deductible under §212, even though there are income-producing assets at stake. Otherwise, almost all legal fees would be deductible because in any civil lawsuit a loss will result in the loss or property.