Jean W. Lange and Jeanne P. Lange - Page 2

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                        Year                          Deficiency                      
                        1992                           $48,689                        
                        1993                           19,490                         
                        1994                           8,743                          

          The sole issue for decision is whether petitioners are entitled             
          to deductions under section 162 or section 212 for legal expenses           
          paid during the years 1992, 1993, and 1994.1                                
                                  FINDINGS OF FACT                                    
               Most of the facts have been stipulated and are so found.               
          The stipulations of facts and attached exhibits are incorporated            
          herein by this reference.  At the time the petition in this case            
          was filed, petitioners resided in Sac City, Iowa.                           
               Petitioner Jean Lange (hereinafter referred to as peti-                
          tioner) and his brother, Elmer Lange (Elmer), acquired an 80-               
          percent interest in Union State Bank (the Bank) in late 1979 or             
          1980.  Later, the brothers formed Madison Holding Company                   
          (Madison) and exchanged the Bank stock (and the debt they had               
          incurred in purchasing the Bank stock) for stock in Madison.                
          While each brother had purchased an equal number of shares of the           
          Bank stock, petitioner incurred $120,000 more debt than Elmer in            

               1All section references are to the Internal Revenue Code in            
          effect for the taxable years in issue, and all Rule references              
          are to the Tax Court Rules of Practice and Procedure, unless                
          otherwise indicated.                                                        

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Last modified: May 25, 2011