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Petitioners also paid another attorney, Janet Brown, and two
reporting services, Bryant Court Reporting Services, Inc., and
Associated Reporting & Transcription, for services rendered in
connection with the malicious prosecution suit.
Prior to the years in issue, petitioners were involved in
various bankruptcy proceedings, both in their individual
capacities and with respect to their status as partners in Tara,
the investment discussed above. Prior to and during 1995,
petitioners employed an attorney, Robert Willis, to bring a
malpractice suit against a law firm which had represented
petitioners with respect to their investment in Tara, the
bankruptcy of Tara, and petitioners’ own personal bankruptcy. In
1995 and 1996, petitioners hired another attorney, Brian
Upchurch, to bring another legal malpractice suit, this time
against Robert Willis.
Investment Expense
While a deduction generally is allowed for interest expense,
an individual’s deduction of investment interest is subject to
certain limitations, and it generally may not exceed the
individual’s “net investment income” for the taxable year. Sec.
163(a), (d)(1); see also sec. 163(h) (disallowing any deduction
for “personal interest”).
Petitioners argue that the $29,103 “investment” expense
listed on their 1995 return arose as follows: Prior to being
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Last modified: May 25, 2011