Wallace R. Noel and Robinette Noel - Page 24

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          maintaining sufficient records to substantiate the propriety of a           
          deduction.  Sec. 1.6001-1(a), Income Tax Regs.  At trial, no                
          reliable evidence was produced by petitioner.  A photocopy of a             
          handwritten note made by Mr. Hoover listing various expenses was            
          produced.  Many of the items in the handwritten note were                   
          illegible, the descriptions were ambiguous, and no amounts were             
          supported by documentation.  Petitioner also produced a letter              
          from his lawyers, listing expenses incurred by petitioner.10  The           
          letter does not assist petitioner in substantiating his expenses.           
          Accordingly, we find petitioner's evidence insufficient to                  
          substantiate his claimed expenses involving the T.J. Cinnamons              
          Bakery franchise.                                                           
          Investment Interest Expense Deduction                                       
               Respondent, in her notice of deficiency, disallowed                    
          petitioner's claimed investment interest expense deduction of               
          $156,441 and determined that petitioner realized $404,210 of                
          income from debt forgiveness.11  On brief, respondent abandoned             

          10The letter from petitioner's attorneys was sent to the                    
          sellers of the T.J. Cinnamons Bakery franchise.  It was written             
          as part of petitioner's attempts to rescind the transaction and             
          recover his money.                                                          
          11Petitioner, in his 1990 Federal income tax return,                        
          reported $1,224,395 as investment interest expense carry forward.           
          This amount was also disallowed by respondent in her notice of              
          deficiency.  This disallowance affected the deficiency determined           
          for 1991.  Petitioner concedes on brief that the 1990 Federal               
          income tax return inaccurately reported interest accrued in prior           
          years, because none of that interest was actually paid until                
          1990.  Accordingly, the interest carried forward will consist               

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