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personally or gave away and for which she had simultaneously
claimed a deduction for advertising expenses. Respondent
disallowed $4,964 and $5,160 for 1998 and 1999, respectively, of
the total amounts which petitioner had claimed as costs of goods
sold.
2. Mortgage Interest
In 1984, petitioner and her then husband, John Little (Mr.
Little), borrowed $25,000 from Tri-Counties Bank, to pay expenses
incurred in their children's apparel business. Petitioner's
father, Vernon Blake (Mr. Blake), cosigned the note. Petitioner
and Mr. Little signed a "Security Agreement" with Mr. Blake and
signed quitclaim deeds on three properties as security for Mr.
Blake. Mr. Blake did not record his security interests in any of
the three properties.
In 1987, petitioner and Mr. Little filed a voluntary Chapter
7 Bankruptcy Petition. Mr. Blake never attempted to foreclose
upon his security interests in any of the properties.
During the bankruptcy, petitioner and Mr. Little
relinquished their interests in the properties. The bankruptcy
trustee disposed of the properties, and Mr. Blake did not receive
any of the properties or the proceeds from their sale.
Petitioner does not have any records from the 1987 bankruptcy and
does not know whether her father filed a claim or received any
distributions from the bankruptcy.
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Last modified: May 25, 2011