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E. Whether Petitioners May Deduct $1,304.14 That They Claim
They Paid To Refinance the W. 66th Street Property
Petitioners contend that, on August 5, 1999, they paid
$1,304.14 to refinance the W. 66th Street property, and that they
may deduct this amount for 1999. We disagree for several
reasons. First, petitioners raised this issue for the first time
on brief. Generally, we do not consider an issue raised for the
first time on brief and do not do so here. DiLeo v.
Commissioner, 96 T.C. 858, 891 (1991), affd. 959 F.2d 16 (2d Cir.
1992); Torres v. Commissioner, 88 T.C. 702, 718 (1987). Second,
even if we considered this argument, there is no evidence that
petitioners paid any amount to refinance the W. 66th Street
property in 1999. Third, deduction of this amount for 1999 is
not appropriate because a taxpayer generally must capitalize the
cost of refinancing property that is not a principal residence.
Sec. 461(g)(1).
F. Whether Petitioners May Deduct $2,219 as a Bad Debt
Petitioners contend that they may deduct as a bad debt in
1999 a 1-percent penalty for late rent, totaling $2,219, that
they claim their Crenshaw Blvd. property tenants owe them but
have not paid. We disagree.
A taxpayer may deduct a debt that becomes worthless in the
taxable year. Sec. 166(a)(1). However, an unpaid amount is not
deductible as a bad debt unless the taxpayer has included the
amount in income for the year for which the bad debt is deducted
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