- 33 - Petitioners claimed Schedules A, C, and E deductions for each of the years in issue. Respondent disallowed some of these deductions because the Earl Kiem Bell/Shores escrow account, rather than petitioners, paid the expenses. Respondent disallowed others because petitioners failed to substantiate that the expenses had a business purpose.11 Petitioners argue that they substantiated their business deductions with canceled checks and through petitioner husband's testimony about the purpose of the checks. Petitioners contend that the legal and professional fees they paid in 1987 are deductible on Schedule C, not Schedule A, as determined by respondent. Petitioner husband spent $6,500 in legal fees relating to his bankruptcy resulting from his and Americana's business failure. Petitioners argue that the legal fees are a Schedule C deduction under the origin of the claim doctrine. United States v. Gilmore, 372 U.S. 39, 48 (1963); Dowd v. Commissioner, 68 T.C. 294, 303-304 (1977). In Dowd v. Commissioner, supra, we relied on the origin of the claim doctrine in deciding that business expenses of a bankrupt taxpayer were deductible under section 162(a). Since 11 Respondent concedes that petitioners may deduct for 1987, advertising expenses of $140.13, office expenses of $488.31, licenses and fees of $279.96, dues of $41, rental maintenance of $684.70, and insurance expenses of $759; for 1988, office expenses of $643.19, rental maintenance of $346, rental insurance of $198, and Schedule C rental expenses of $6,832.85; and for 1989, advertising of $135, and rental insurance of $197. Respondent also concedes that petitioners may deduct a charitable contribution of $50 to the Salvation Army for 1989.Page: Previous 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 Next
Last modified: May 25, 2011