Alvin S. Kanofsky - Page 5

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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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