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properly reclassified as a deduction related to portfolio income.
Likewise, we think it ineluctable that rollback taxes, as real
property taxes, are incurred "in connection with" the Property,
and we therefore hold that they are expenses allocable to
portfolio income under section 469(e)(1)(A)(i)(II) and the above
regulations. Petitioner, in any event, has failed to convince us
otherwise.
Under section 212(3), there is allowed as a deduction all
the ordinary and necessary expenses paid or incurred in
connection with the determination, collection, or refund of any
tax. Although section 212(3) applies only to individuals, under
section 702 each partner, in determining his income tax, is
required to take into account separately his distributive share
of certain partnership items. Section 702(a)(7) includes "other
items of income, gain, loss, deduction, or credit, to the extent
provided by regulations prescribed by the Secretary." Section
1.702-1(a)(8)(i), Income Tax Regs., provides that "Each partner
shall take into account separately, as part of any class of
income, gain, loss, deduction, or credit, his distributive share
of the following items: * * * nonbusiness expenses as described
in section 212". See Surloff v. Commissioner, 81 T.C. 210, 241
(1983). Since the parties have stipulated that the attorney's
fees were related "to the determination of the rollback taxes"
owing on the Property, we hold that the attorney's fees were
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