- 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.
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