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In sum, we are satisfied, as we were in the earlier case,
that petitioners' Schedule C expenses, with one exception, are
not currently deductible and must be capitalized.
The exception relates to State and local real property taxes
of $1,793.94 and $2,008.31 which petitioners paid in the taxable
years 1991 and 1992, respectively. The obligation to pay these
taxes arose out of mere ownership of the undeveloped land, not
out of petitioners' rezoning activities. We hold that these
taxes are deductible under section 164(a).6
To implement our holdings and respondent's concessions,
Decision will be entered
under Rule 155.
6 Respondent has made no claim that these taxes should be
capitalized under sec. 263A, an issue that was involved in the
earlier case. Since it is undisputed that they relate to
petitioners' "business", they constitute a Schedule C deduction
and will be taken into account in computing "adjusted gross
income" for purposes of the 2-percent limitation on itemized
deductions. See Brown v. United States, 434 F.2d 1065 (5th Cir.
1970); sec. 1.62-1T, Temporary Income Tax Regs., 53 Fed. Reg.
9870 (March 28, 1988).
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