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only a portion of the fees actually paid to CAA is deductible.
Because this issue was first raised by respondent in her amended
answers to the petitions, she carries the burden of proof.
To be deductible under section 212, an expense must meet the
ordinary and necessary test. Sec. 1.212-1(d), Income Tax Regs.
Thus, the expenses must be reasonable in amount and bear a rea-
sonable and proximate relation to the purpose for the expendi-
ture. Id. The determination of reasonableness is based on the
facts and circumstances. See Palo Alto Town & Country Village,
Inc. v. Commissioner, 565 F.2d 1388 (9th Cir. 1977), affg. in
part and remanding T.C. Memo. 1973-223.
Petitioner Robson claimed deductions of $4,323.52, $3,170,
and $4,166 for appraisal fees paid to CAA. Petitioner Trnavsky
deducted $3,891.48, $3,140, and $3,333 for the appraisal fees
that he paid to CAA. Respondent did not dispute that these fees
were actually paid to CAA. Nor did respondent present any
evidence to indicate that CAA charged petitioners more than it
charged other taxpayers to perform museum appraisals. Respondent
has not carried her burden to show that the fees paid were
unreasonable. Accordingly, we find for petitioners on this
issue.
Based on the foregoing,
Decision will be entered
under Rule 155.
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