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265(a)(1); sec. 1.212-1(a)(1), Income Tax Regs. Thus, petitioner
is entitled to deduct the same percentage of the legal expenses
incurred in securing the Social Security disability benefits as
the percentage of the benefits which are included in income. See
Andrews v. Commissioner, T.C. Memo. 1992-668. This deduction is
a miscellaneous itemized deduction subject to the 2-percent floor
of section 67(a); whether it reduces petitioner’s taxable income
will be determined in the Rule 155 computation.
Petitioner makes two final arguments. First, petitioner
argued in the petition that he did not receive the Social
Security payments until 1998. However, at trial petitioner
admitted (and the evidence reflects) that he received the
payments in late December 1997. Second, petitioner argues that a
portion of the benefits was attributable to 1996, not 1997.
However, lump-sum benefits generally are taxed in the year
received rather than the year to which they are attributable.
Secs. 86(e), 451(a).
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered
under Rule 155.
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