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(25/40) "searching for property to buy and customers to
which to sell his property." Petitioner also argues that
its expenses for miscellaneous, supplies, utilities and
telephone, legal and accounting, and franchise and income
taxes should be allocated to petitioner's rental activity
in the same ratio as petitioner's rental income bears to
total income; i.e., 33.04 percent in 1992 and 32.04 percent
in 1993. Petitioner computes those percentages as follows:
1992 Percent 1993 Percent
Rental income $58,997.34 33.04 $54,054.00 32.04
Interest income119,573.90 66.96 114,634.44 67.96
Total income 178,571.24 100.00 168,688.44 100.00
Respondent rejects petitioner's assertion that 62.5
percent of Mr. McKelvey's salary, the payroll tax
attributable thereto, and the expense for the automobile
furnished to Mr. McKelvey should be treated as nonpassive
expenses that can offset portfolio income. Respondent
argues that neither collecting monthly note payments nor
looking for additional properties to purchase justifies
petitioner's allocation. As to the former, respondent
points to Mr. McKelvey's testimony that he spends only 1
day per month collecting note payments from his buyers. As
to the latter, respondent points out that petitioner did
not purchase or sell any real property during 1992 and 1993
and argues that the estimate of the amount of time spent by
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