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Petitioner is a licensed real estate agent in the State of
Connecticut, but that license is not valid in the State of
Massachusetts.
The documents submitted at trial constitute all of the
Harwichport property expense records for 1990. During the
taxable year 1990, petitioner incurred and paid mortgage interest
expense of $9,513.23 and real estate taxes of $1,248.39.
In the notice of deficiency, respondent determined that
petitioner's expenditures were not paid or incurred in carrying
on a trade or business pursuant to section 162 or for the
production of income pursuant to section 212. Respondent also
determined that the expenditures were not ordinary and necessary.
Petitioner bears the burden of proving that respondent's
determination is not correct. Rule 142(a); Welch v. Helvering,
290 U.S. 111 (1933). Respondent filed an amended answer and
alleged that petitioner failed to substantiate the claimed
expenses as required by section 274(d), and that section 469
precludes petitioner from deducting the expenses. We conclude
that section 469 does not limit petitioner's deductions in 1990.
Petitioner participated in the activity for more than 100 hours,
and this amounted to substantially all of the participation in
the activity. See sec. 1.469-5T(a)(2) and (3), Temporary Income
Tax Regs., 53 Fed. Reg. 5725-5726 (Feb. 25, 1988). The parties
also disagree whether the expenditures were capital in nature or
currently deductible.
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