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$18,000, petitioners are entitled to deduct this legal expense,
subject to the passive loss limitation of section 469.
The attorney testified that she represented petitioner on
numerous legal matters, including in the South Coast Thrift loan
litigation. We find that petitioners reasonably estimated the
value of the legal services attributable to petitioners’ rental
activity to be $18,000. We hold that, as limited by respondent’s
concession, petitioners are entitled to deduct this legal expense
of $18,000, subject to the passive loss limitation of section
469.
3. Other Schedule C Expenses
Petitioners contend their accountant, at some point,
possessed receipts and other documents fully substantiating all
their 1992 and 1993 Schedule C expense deductions. However,
neither petitioners nor their accountant introduced documentation
or testimony at trial to substantiate many of the deductions
claimed. For example, no checks for property tax payments were
introduced, even though the accountant testified that he, at one
time, had the canceled checks. The only other documents
introduced in evidence to document petitioners’ Schedule C
expenses were a letter from Heitz Insurance Agency documenting
some, but not all, of the insurance expenses deducted for 1993,
two invoices from Pickney Electric Co., which were partly
illegible but appeared to relate to electrical work done as part
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