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liabilities.16 Therefore, we similarly find that petitioner’s
bankruptcy was proximately caused by his business liabilities.
Having determined that petitioner’s bankruptcy was
proximately caused by the failure of his business, we turn to
determining what portion of the bankruptcy fees is deductible.
Respondent argues that any allocation of the bankruptcy fees
between business and personal pursuits should be based on the
time spent by the attorneys, accountants, and trustee dealing
with each of the bankruptcy liabilities. We disagree. We set
forth a reasonable method of allocation in Cox v. Commissioner,
supra, under which we allowed the taxpayer to deduct a percentage
of the bankruptcy fees paid equal to the ratio that the claims of
the taxpayer’s business creditors bore to the total claims. We
do the same here and allow petitioner to deduct 93.79 percent of
his substantiated bankruptcy fees. Because petitioner
substantiated that he paid a total of $44,327 in bankruptcy fees
in 1995,17 he may deduct $41,574 of these fees under section 162
(i.e., $44,327 � .9379).
16Petitioner also cites his prior loss of $1 million in
MACAT as an additional significant contributing factor to his
personal bankruptcy. Because petitioner failed to establish the
actual timing or amount of this loss, we limit our consideration
to the liabilities listed in the bankruptcy schedules.
17Petitioner points to the docket sheets for the bankruptcy
court proceedings as evidence that he paid bankruptcy fees in
excess of $49,000. The docket sheets reflect only that the court
approved payment of the fees out of the bankruptcy estate, not
that petitioner personally paid them. Petitioner has established
that he personally paid only $44,327.
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