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petitioner's business; therefore, we conclude that the legal
expenses were nondeductible personal expenses.
2. Mortgage Interest and Property Tax Expenses
Under sections 163 and 164, mortgage interest on a qualified
residence and real property taxes are deductible. If a couple
resides in a community property state, generally, each spouse is
entitled to deduct one-half of all deductible expenses properly
chargeable against community income. Johnson v. Commissioner, 72
T.C. 340, 347 (1979).
On the return, petitioner deducted $4,340 of mortgage
interest expense and $2,031 of real property taxes (one-half of
the total mortgage interest and real property tax expenses)
relating to the Bridgewater house. Mrs. Condello testified that
she made the mortgage payments on the Bridgewater house out of a
checking account that contained rental income from her separate
property. During marriage, income from separate property is
community income. Maben v. Maben, 574 S.W.2d at 232. We find
that Mrs. Condello used community income to make the mortgage
payments, and petitioner is entitled to deductions for one-half
of the mortgage interest and one-half of the real property taxes.
B. Schedule C Deductions
Section 162(a) allows a deduction for all ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business. On his Schedule C, petitioner
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