Harry D. Bledsoe and Annie L. Bledsoe - Page 14

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            part of the proceedings.  Accordingly, we find that the part of                             
            these proceedings in which Resthaven had an interest originated                             
            with respect to Resthaven.                                                                  
                  After examining the evidence and analyzing the breakdown of                           
            the legal fees, we hold that, in 1987 and 1988, 35 percent of the                           
            amount disallowed by respondent was, in fact, incurred to                                   
            maintain the property held by Resthaven and is deductible.3  See                            
            sec. 212; Burch v. United States, supra.                                                    
            Section 1244 Stock                                                                          
                  Ordinary loss treatment is available to those individuals                             
            with "section 1244 stock" in a corporation with total equity of                             
            $1 million or less.  The section 1244 stock must have been                                  
            originally issued to them for money or property by a domestic                               
            small business corporation.  Sec. 1244(a), (c).  Section 1244                               
            stock loss deductions cannot exceed $50,000 (or $100,000 if a                               
            joint return was filed) per annum.  Sec. 1244(b).                                           
                  For 1988 and 1989, petitioners claimed section 1244 losses                            
            on their Diamond stock.  Petitioners assert that they were                                  
            entitled to an ordinary loss deduction of $196,503, the amount of                           
            their claimed basis in Diamond.  Due to the section 1244                                    

            3 We note that $600.75 of the fees paid to Carpenter, Hein,                                 
            Carpenter was paid in 1989, but has not been placed in issue for                            

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