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consequence of this reclassification (1) the amount of the
deduction was reduced because of the 2-percent floor on
miscellaneous itemized deductions pursuant to section 67(a), and
(2) petitioners became subject to the alternative minimum tax.
Petitioners filed their joint 1993 tax return late. They
offered no evidence, and made no reference in their posttrial
briefs, regarding their liability for the section 6651(a)(1)
addition to tax for failure to timely file a return. Consequently,
we deem petitioners to have conceded this matter, and therefore the
only issue for decision is whether the $197,234 in legal fees is
deductible as Schedule C business expenses or as Schedule A
miscellaneous itemized deductions. Resolution of this issue turns
upon whether the legal fees were incurred by Thomas F. Noons
(petitioner) in connection with his trade or business, as
petitioners maintain, or were incurred for the production of
income, as respondent maintains.
All section references are to the Internal Revenue Code as in
effect for the year in issue.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The
stipulation of facts and the exhibits submitted therewith are
incorporated herein by this reference.
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