Lewis L. Reese - Page 8

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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               
               To reflect the foregoing,                                              
                                             Decision will be entered                 
                                        under Rule 155.                               

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