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ordinary income. Petitioner argues that the real estate that was
held by Payne & Potter was sold at a loss.
No credible evidence in the record supports a finding that Payne
& Potter or petitioner incurred a loss with respect to any real
estate held by Payne & Potter, and we are satisfied that the real
estate activities of Payne & Potter constituted the source of this
$12,826. We conclude that this $12,826 deposited into petitioner's
bank accounts should be taxable to petitioner as ordinary income
received in connection with petitioner's interest in Payne & Potter.
$12,000 in Deposits Relating to Legal Fees -- 1988
Respondent argues that $12,000 in disputed deposits constituted
legal fees paid to petitioner by 2618 Inc and not funds received by
petitioner to make payments on the $55,753 TexAmBkSW loan
transaction, as alleged by petitioner.2 Respondent notes that the
$12,000 in deposits was received by petitioner after the maturity
date of the $55,753 loan and that, on checks representing $9,500 of
the disputed $12,000, the funds were described as legal fees.
Consistent with the credible evidence, we conclude that the
$12,000 constituted taxable legal fees to petitioner.
2 This $12,000 in alleged legal fees represents the sum of
the disputed bank deposits at TexGuarantyBk, account No.
00007823, that were dated 6/20/88, 9/2/88, 9/12/88, 9/26/88, and
10/7/88 (see supra p. 20).
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