Melvin D. Lee - Page 10

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          income.  Sec. 469(a), (b), (d).  If, however, a taxpayer sells              
          his entire interest in a passive activity, an excess loss                   
          relating to the activity for the year the sale occurred                     
          (including suspended losses relating to the activity carried                
          forward into the year of the sale) over the total income for the            
          current year from all passive activities is treated as a loss               
          from a nonpassive activity and is not subject to the above                  
          limitation of section 469(a).  Sec. 469(g).                                 
               Other than the claims made on his 1992 through 1996 Federal            
          income tax returns, petitioner has not offered any evidence to              
          substantiate that he incurred disallowed passive activity losses            
          in 1992 through 1996 in relation to the Peach Tree Property.  As            
          discussed previously, claims made on petitioner’s tax returns do            
          not substantiate the items in issue.  Petitioner is not entitled            
          to deduct in 1997 the claimed $35,289 in suspended passive                  
          activity losses relating to the Peach Tree Property.                        

          Belmont Gardens Legal Fees -- $40,466                                       
               Petitioner has not substantiated that he paid $40,466 in               
          legal fees in relation to the construction of Belmont Gardens.              
          Petitioner introduced into evidence certain checks made to three            
          different law firms; however, these checks totaled only $9,500.             
          At trial, petitioner did not call to testify the attorneys who              
          allegedly represented him in the Belmont Gardens litigation,                
          notwithstanding the Court’s suggestion to do so.  See Wichita               

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