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First, as to the issue of State and local taxes paid, we are
persuaded from our review of the entire record before us that the
$8,000 in canceled checks submitted at trial was paid to the
State of Illinois for personal taxes owed by petitioner and not
for those owed by his business. We find petitioner’s testimony
credible that these checks were for State and local income taxes
personally owed to the State of Illinois. We are further
convinced by the check registry submitted at trial that the
checks at issue were, in fact, paid for personal State income
taxes owed. We believe petitioner’s testimony that his law
practice was not operating as a corporation during the year in
issue and that these checks were not paid for any State or local
taxes on its behalf. Finally, we note that the State and local
tax deduction at issue was claimed only on petitioner’s Schedule
A and not his Schedule C, Profit or Loss From Business, where
taxes paid for his business would be deducted. Accordingly, we
hold that petitioner is entitled to an itemized deduction in the
amount of $8,000 for State and local taxes paid in 2001.
With respect to petitioner’s deduction for tax preparation
fees, at trial, petitioner explained that these expenses were
primarily for legal services. Although petitioner did submit two
letters from Mr. Moss listing the nature of the services provided
to petitioner, it is unclear, both from the letters and from
petitioner’s testimony what portion of these services was
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