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loan. As pertinent here, section 162(a) allows a deduction for
ordinary and necessary expenses paid during the taxable year in
carrying on any trade or business. We have found that petitioner
has failed to establish that he was in the trade or business of
either investing generally or making loans specifically in 1986,
when he made the Miller loan, or in 1993, the year in which he
claims that that loan became worthless. We find on the instant
record that petitioner has failed to show that the $2,641 of
unrecovered principal of the Miller loan and the legal expendi-
tures that he had paid as of the end of 1993 in connection with
the recovery of that loan constitute under section 162(a) ordi-
nary and necessary business expenses that he paid during 1993 in
carrying on a trade or business.
As pertinent here, section 212(1) and (2) allows a deduction
for ordinary and necessary expenses paid during the taxable year
for the production or collection of income or for the management,
conservation, or maintenance of property held for the production
of income. We have found that, because the interest rate called
for by the Miller loan was deemed to be usurious under California
law, petitioner was entitled to recover only the principal of
that loan, and the legal expenditures that petitioner had paid as
of the end of 1993 were for the recovery of the principal of the
Miller loan, and not for the recovery of interest thereunder. On
the instant record, we find that petitioner has failed to show
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