-370-
For 1986, almost all of Kanter’s expenses claimed as deductions
on the Kanters’ tax return were paid through funds from TACI and
PSAC accounts. The funds used to pay Kanter’s expenses either
belonged to Kanter or were borrowed by him from other TACI and
PSAC clients.
During the course of the trial, petitioners began offering
evidence with respect to the above expenses as well as certain
1982 Schedule C deductions. Counsel for the parties then
requested and received a short recess in order to meet and
discuss off the record the various evidentiary and legal matters
pertaining to these expenses. The Court did not participate in
counsels’ deliberations.
Immediately following their conference, counsel for the
parties advised the Court that: (1) The Kanters were entitled to
deduct the 1982 Schedule C expenses, and (2) the 1987, 1988, and
1989 Schedule A and Schedule C expenses the Kanters claimed had
been substantiated, except that respondent (a) disputed that the
expenses paid out of funds from the TACI and PSAC accounts had
been paid by Kanter and (b) questioned whether the Kanters were
entitled to deduct expenses with respect to property held in
trust. Counsel made no mention as to whether this agreement
included the Kanters’ 1986 Schedule A deduction for interest
expenses. Transcr. at 3957-3960. However, counsel for
petitioners expressed to the Court their belief that the parties
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