Patrick E. Catalano - Page 16




                                       - 16 -                                         
          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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