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1993, petitioner was regularly and continuously engaged in a trade
or business involving the sale of promissory notes.
Petitioners maintain that (1) during 1993 petitioner was
engaged in the trade or business of acquiring and selling
underperforming promissory notes, and (2) the legal fees incurred
were proximately related to petitioner’s trade or business
activities. Respondent does not challenge petitioners’ contention
that the legal fees were related to the acquisition of the Forum
303 note. Rather, respondent disagrees with the assertion that
petitioner was engaged in the trade or business of acquiring
promissory notes. In this regard, respondent alternatively
contends: (1) Petitioner’s acquisition of the Forum 303 note was
an isolated investment transaction that does not rise to the level
of a trade or business; or (2) petitioner was acting within the
scope of his employment with AMI when he pursued the acquisition of
the Forum 303 note. Under either position, respondent posits
petitioners’ legal fees would not be deductible under section
162(a). For the reasons that follow, we agree with respondent that
petitioner’s legal fees are not Schedule C business deductions.
In our opinion, petitioner was not in the trade or business of
acquiring and selling real estate promissory notes. He did not
regularly or continuously enter into the purchase and sale of these
types of promissory notes. Although we are mindful that on several
occasions between 1986 and 1988 petitioner attempted to acquire
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