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III. Schedule C Loss From Petitioner’s Law Practice
Next, we turn to the issue of whether petitioner sustained
a 1988 deductible loss of $6,724 associated with his law
practice.
Here, as in the case of petitioner’s Schedule A itemized
deductions, petitioner has offered no evidence to substantiate
the items (mortgage interest, utilities, telephone, depreciation,
laundry and cleaning, and bar membership dues) that constitute
the alleged deductible expenses. Here, too, petitioner has
failed to provide the minimal substantiation of the alleged
expenses that would permit us to estimate the allowable
deductions pursuant to Cohan v. Commissioner, supra. Therefore,
we reject petitioner’s claim, raised at trial, to a Schedule C.
loss.8
IV. Schedule E Losses From Real Property Rentals
Petitioner’s 1988 Schedule E indicates that, during the
audit year, petitioner owned nine rental properties, each of
8 Petitioner’s reporting of zero gross receipts from his
law practice during the audit year (the first 5-1/2 months of
which preceded his incarceration) indicates that the loss may be
disallowed on the alternative ground that, during that year,
petitioner did not conduct his law practice with a bona fide
intention of making a profit and may, in fact, have either
abandoned or at least temporarily discontinued the practice after
1987 when, according to the 1987 Form 1040, he earned a small
($1,698) profit on very low ($2,884) gross receipts. As
discussed more fully infra in section IV, losses incurred by an
individual in connection with a purported trade or business are
not allowable in the absence of a bona fide profit motive.
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