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petitioner husband's business failure with Americana caused his
bankruptcy, legal fees paid to file his bankruptcy petition
originated with his business. We hold that petitioners may
deduct on Schedule C legal fees of $6,500 caused by his business
failure. Dowd v. Commissioner, supra at 304.
Petitioners argue that their payments to Americana investors
of $3,725 in 1987, $1,800 in 1988, and $6,370 in 1989 are
deductible on Schedule C as ordinary and necessary business
expenses.
Respondent argues that the payments to the Americana
investors are deductible on Schedule A because Americana's
activities were not a trade or business of petitioner husband.
Many of the investors were friends of petitioner husband's
family. Respondent argues that petitioner husband's claim that
he paid investors to protect his own business reputation are
self-serving. Respondent argues that no evidence suggests that
petitioner husband's financial problems with these investors
would affect his reputation as a real estate broker.
We disagree. We find that he carried his burden of proof in
this respect. Petitioners may deduct on Schedule C the payments
to the Americana investors.
Petitioners paid income tax return preparers' fees of $872
to H & R Block in 1988. Petitioner husband argues that since he
was a sole proprietor, he may deduct the return preparation fees
on Schedule C, not on Schedule A. We disagree. Tax preparation
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