Holden C. Gutermuth - Page 2

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               Unless otherwise indicated, all section references are to              
          the Internal Revenue Code in effect for 1989, and all Rule                  
          references are to the Tax Court Rules of Practice and Procedure.            
               After settlement, the issues for decision are:  (1) Whether            
          a claimed $35,000 loss deduction is allowable either as a                   
          partnership loss or as a Schedule C business expense; and                   
          (2) whether petitioner is liable for the accuracy-related penalty           
          for negligence.                                                             

                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
               At the time the petition was filed, petitioner was married             
          and resided in Troy, New York.1                                             
               Petitioner is a practicing lawyer and owns and operates a              
          real estate and apartment rental business.                                  
               From 1984 through May of 1989, petitioner practiced law as a           
          partner in the law firm of Noonan, Troue, Gutermuth & O’Connor              
          (NTGO).  On June 1, 1989, the partners of NTGO dissolved the                
          partnership.                                                                
               Upon dissolution of NTGO, petitioner and J. Paul Troue,                
          another of the former partners in NTGO, began to practice law               
          together under the firm name of Noonan, Troue & Gutermuth (NTG).            


          1    Because petitioner filed his individual 1989 Federal income            
          tax return as married filing separately, petitioner’s wife was              
          not named in the notice of deficiency and is not a party to this            
          case.                                                                       




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