*452OPINION.
Siepkin :During the fiscal year ended March 31,1922, the partnership, composed of the stockholders of the dissolved corporation, Kentucky Block Coal Mining Co., paid $10,000 attorney fees for services rendered in connection with abating a proposed penalty of $68,000 against the corporation for filing a false and fraudulent excess-profits-tax return for the year 1917. The sole question involved in this proceeding is whether respondent erred in refusing to allow the attorney fees as a deduction from gross income of the partnership.
The petitioner alleges and the respondent admits that the partnership took over all the assets of the corporation and assumed its liabilities.
The liability of the partnership to pay the penalty asserted by the respondent against the corporation would necessarily arise'from the fact that the partners were transferees of the corporation as well as the obligation assumed by contract. The assets taken over by the partnership were charged with a lien in favor of the United States and the petitioner, as a member of such partnership, was justified, as a proper business precaution, in employing lawyers to prevent such a lien becoming a judgment which would reduce the property of the partnership. We hold that the litigation arose out of a transaction directly connected with the business and the attorney fees paid are deductible as ordinary and necessary expenses paid or incurred in carrying on a trade or business.
^Reviewed by the Board.
Judgment will be entered under Rule 50.