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Patrick E. Catalano, pro se.
Margaret S. Rigg, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
LARO, Judge: This is a proceeding for redetermination of a
deficiency in income tax and penalties for petitioner's 1995 tax
year, as set forth below:
Year Deficiency Sec. 6662 Penalty
1995 $70,198 $14,040
After concessions,1 we must determine the following issues:
(1) Whether a deduction for mortgage interest of $126,352
claimed by petitioner in connection with the foreclosure of his
residence is allowable. We hold he may deduct $83,425 of this
expense.
(2) Whether a deduction of $46,462 claimed by petitioner for
legal, accounting, and U.S. trustee's fees (bankruptcy fees) he
paid in connection with his individual bankruptcy is allowable as
an ordinary and necessary business expense under section 162. We
hold he may deduct $41,574 of this expense.
(3) Whether petitioner is liable for the accuracy-related
penalty under section 6662(b)(2) for substantial understatement
of tax liability. We hold he is not.
1Petitioner concedes an adjustment in the amount of $2,722
which disallowed a loss claimed for the rental of one of his
boats.
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