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Respondent has also conceded that petitioner may claim, as
business expenses, monthly bank service charges totaling $220 in
1990 on Real Services’ checking account. She claims that she
should be allowed to deduct additional service charges imposed on
her personal account, but she has failed to substantiate to our
satisfaction either the amount of these claimed expenses or their
business purpose. Petitioner has also failed to meet the
substantiation requirements of section 274 with respect to a
claimed traveling expense deduction in 1990 of $92.
Petitioner further claims a deduction of $4,064.10 for
telephone service in 1990. As was the case for 1989, her
documentary evidence is duplicative and unclear, and there is
generally no basis to distinguish between local and long-distance
charges. We are persuaded, however, that local telephone service
was utilized by petitioner to conduct her escort business. Again
exercising our discretion under the Cohan rule, we hold that she
may deduct $600 in 1990 for local telephone expenses at the
locations where she conducted her escort business in that year.
Petitioner may deduct additional legal fees of $1,650,
incurred in 1990 by her in defense against charges that she was
using the apartment on E. 77th Street for an illegal purpose,
because they were incurred in connection with the preservation of
her income-producing activities and are deductible. See Johnson
v. Commissioner, 72 T.C. at 348. Similarly, she has demonstrated
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