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paid these amounts during the taxable years for ordinary and
necessary business purposes”.
The disallowance of petitioner’s claimed Schedule C
deductions for 1996-98 is based upon respondent’s view that
petitioner was not engaged in a trade or business during those
years. For each of those years, however, respondent allows some
of the disallowed Schedule C deductions (e.g., insurance, taxes,
mortgage interest) as Schedule A deductions with respect to
investment properties. For 1996 and 1997, respondent also allows
Schedule A deductions for employee business expenses.
By his treatment of petitioner’s Schedule C expenses for
1999 and 2000, respondent, in effect, concedes that, during those
years, petitioner was carrying on a trade or business at the
Bethlehem property, but not at his other two properties, which
respondent continues to treat as investment properties. For 1999
and 2000, respondent allows Schedule C deductions for expenses
associated with the Bethlehem property, but converts the portion
of petitioner’s Schedule C deductions for taxes and interest
associated with the other two properties into Schedule A
deductions.
The total additional Schedule A deductions allowed each year
are as follows:
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