                            T.C. Memo. 1996-321



                          UNITED STATES TAX COURT



                   JOELLEN MILLER MURATA, Petitioner v.
               COMMISSIONER OF INTERNAL REVENUE, Respondent


        Docket No. 2166-95.                         Filed July 15, 1996.


        JoEllen Miller Murata, pro se.


        Michele Or and Louise Pais, for respondent.


                            MEMORANDUM OPINION


        NAMEROFF, Special Trial Judge:    This case was heard pursuant

to the provisions of section 7443A(b)(3) and Rules 180, 181, and

182.1       Respondent determined a deficiency in petitioner's 1991

Federal income tax in the amount of $1,628.

        1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year at issue. All
Rule references are to the Tax Court Rules of Practice and
Procedure.
                               - 2 -


     After concessions, the issues for decision are:     (1) Whether

petitioner is entitled to a Schedule A deduction for "research"

expenses in excess of the amount previously allowed by

respondent; (2) whether petitioner is entitled to a Schedule A

deduction for job search expenses; and (3) whether petitioner is

entitled to a Schedule A deduction for "not-for-profit" rental

expenses.

     Some of the facts have been stipulated, and they are so

found.   The stipulation of facts and the attached exhibits are

incorporated herein by this reference.     At the time of the filing

of this petition, petitioner resided in Chatsworth, California.

     In 1961, petitioner received her bachelor of arts in nursing

from Syracuse University.   In 1972, petitioner received a

master's degree in Public Health from the University of

California at Berkeley and completed the Family Nurse

Practitioner Program at the University of California at Davis.

In 1982, petitioner received a Ph.D. in sociology and family

therapy from the University of Southern California.

     Petitioner has been involved in the field of nursing in

various capacities since her graduation from Syracuse in 1961.

During the late 1960's petitioner was employed as a nurse in a

hospital and public health agency.     Since 1972, petitioner has

been employed as a nurse practitioner in association with

teaching responsibilities at various universities.     Her teaching
                               - 3 -


responsibilities include teaching nursing, performing research

projects related to the origins of juvenile delinquency and other

research projects, and directing a number of Federal grants

related to the training of nurse practitioners.

     In 1991, petitioner resided in Rochester, New York, and was

employed by the University of Rochester School of Nursing (UR) as

an Assistant Professor of Nursing.

     During 1991, petitioner attended and presented a paper at

the Second International Family Nursing Conference in Portland,

Oregon, which was held from May 21, 1991, through May 24, 1991.

Petitioner drove from Rochester, New York, to Portland, Oregon,

to attend the conference.   Petitioner left Rochester, New York,

on May 16, 1991, and arrived in Portland, Oregon, on May 20,

1991.

     After the conference, petitioner drove to Los Angeles,

California, where she was employed as a consultant during the

summer.   While in Los Angeles, petitioner used her car for

transportation in and around Los Angeles.   At the end of the

summer, petitioner drove back to Rochester to resume her teaching

responsibilities at UR.   Petitioner's husband, Paul Ganong, drove

back to Rochester with petitioner.

     Petitioner also attended the American Public Health

Association 119th Annual Meeting, in Atlanta, Georgia, which was

held from November 10, 1991, through November 14, 1991.    In
                               - 4 -


addition, petitioner attended the National Council for Family

Relations 1991 Conference in Denver, Colorado, which was held

from November 15, 1991, through November 20, 1991.   Petitioner

presented papers at both conferences.

     In the stipulation of facts, respondent conceded that

petitioner was entitled to "research" expenses in the amount of

$3,443.89.   The following reflects how respondent computed the

amount conceded:   (1) Expenses related to the Second

International Family Nursing Conference held in Portland, Oregon,

from May 21, 1991, through May 24, 1991, including mileage of

2,752 at 27.5 cents per mile from Rochester, New York, to

Portland, Oregon, or $756.80; hotels of $489.59; meals at $26 per

day for 9 days less 20 percent pursuant to section 274(n), or

$187.20; and tolls of $9.40; (2)   Expenses related to the

American Public Health Association 119th Annual Meeting in

Atlanta, Georgia, on November 13, 1991, and the National Council

for Family Relations 1991 Conference in Denver, Colorado, on

November 19, 1991, including airfare of $392; hotels of $384.76;

miscellaneous of $17.80; and meals at $34 per day for 9 days less

20 percent pursuant to section 274(n), or $244.80; and (3) other

expenses including books of $241.82; materials of $129.92;

professional of $361.50; and miscellaneous of $228.30.2

     2
        UR has a reimbursement program regarding travel expenses,
which generally allows reimbursement for registration or
                                                   (continued...)
                                - 5 -


     Sometime in 1990, petitioner experienced financial

difficulties and began to seek new employment that would pay a

higher salary.    In 1990, petitioner sent resumes and her

curriculum vitae to potential employers.

     On December 15, 1990, petitioner flew from Rochester, New

York, to Los Angeles, California, returning on January 7, 1991.

During this trip, petitioner stayed at the home she owned in

Chatsworth, California, in which one of her sons resided.    During

this period, petitioner's job search activities included

organizing her materials, making telephone calls to California

State University at Northridge (CSUN) and the University of

Southern California regarding potential employment, and sending

resumes to various health care organizations in the Los Angeles

area.    Petitioner testified that she mailed resumes from Los

Angeles because she wanted to make local telephone calls

regarding the proper person to whom she should send the resume,

she wanted to follow up the resume with a telephone call, and she

wanted to be available should the opportunity to interview arise.

Petitioner had no interviews during this period.

     On December 18, 1991, petitioner flew from Rochester, New

York, to Los Angeles, California, returning on December 31, 1991.


     2
      (...continued)
conference fees. No issue was raised in this case regarding any
amount not deductible because of petitioner's failure to seek
appropriate reimbursement from UR.
                               - 6 -


Again, petitioner stayed at the home she owned in Chatsworth in

which her son lived.   On December 19, 1991, petitioner

interviewed with Dr. Alocer and his faculty department at CSUN.

In addition, on December 30, 1991, petitioner interviewed with

Colleen McLaughlin at the Kaiser Research Group in Pasadena.

During her stay in Los Angeles, petitioner also made telephone

calls regarding the resumes that she had sent the previous

January.

     In 1991, petitioner's former spouse, Paul Ganong, created

watercolor paintings and sculptures that were exhibited and sold

in a gallery.   Mr. Ganong flew from Rochester, New York, to Los

Angeles, California, on July 31, 1991.    Mr. Ganong traveled to

Los Angeles to look for employment in the art field, such as a

gallery.   Rather than using the return portion of his airplane

ticket to Rochester, Mr. Ganong and petitioner drove back to

Rochester after her summer consulting job ended.    The marriage of

petitioner and Mr. Ganong was dissolved by the Superior Court of

California, in the County of Los Angeles, on December 7, 1994.

     Petitioner's brother, Peter Miller, is a skilled woodworker

in the Adirondack style of woodworking.    Mr. Miller is self-

employed as a woodworker and construction worker.    Prior to 1991,

Mr. Miller began construction of a home on a 5.19-acre parcel of

property located in the Town of New Bremen in Lewis County, New

York.   However, Mr. Miller was unable to finance the entire
                               - 7 -


project.   Mr. Miller conveyed the unfinished house and property

(collectively, the New Bremen property) to petitioner by deed

dated February 23, 1989.   On February 23, 1989, petitioner signed

a building loan and agreement (the mortgage) with the St.

Lawrence National Bank (the bank) in which the bank agreed to

lend petitioner $44,000, which was to be used for the

construction and completion of the unfinished house.    These

improvements included the completion of a cellar, septic tank,

exterior framing, and interior finish work and the installation

of external siding, electricity, and plumbing.    According to

petitioner, she used the loan proceeds of $44,000 to purchase the

New Bremen property from Mr. Miller.   The record contains no

indication as to the cost of the land or the finished house.

      Mr. Miller used the $44,000 to complete construction of the

unfinished house.   After the completion of the house, Mr. Miller

resided in it with his family and faithfully made all required

payments with respect thereto; i.e., mortgage, taxes, repairs.

Petitioner included $3,416.92 in her gross income, which she

described as related to the mortgage payments made by Mr. Miller.

     On Schedule A of their joint Federal income tax return,

petitioner and Mr. Ganong claimed a deduction for job expenses

and other miscellaneous expenses of $12,195.49.    Of this amount,

$4,125 related to research expenses; $1,274.80 related to

petitioner's job search expenses; $3,378 related to Mr. Ganong's
                               - 8 -


job search expenses; and $3,417.69 related to a "not-for-profit"

rental.3   In the notice of deficiency, respondent disallowed the

entire amount for lack of substantiation.

General Legal Principles

     We begin by noting that, as a general rule, the

Commissioner's determinations are presumed correct, and that the

taxpayer bears the burden of proving that those determinations

are erroneous.   Rule 142(a); Welch v. Helvering, 290 U.S. 111,

115 (1933).   Moreover, deductions are a matter of legislative

grace, and the taxpayer bears the burden of proving that he or

she is entitled to any deduction claimed.   Rule 142(a); New

Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).     This

includes the burden of substantiation.   Hradesky v. Commissioner,

65 T.C. 87, 90 (1975), affd. per curiam 540 F.2d 821 (5th Cir.

1976).

     Section 162(a) provides that "There shall be allowed as a

deduction all the ordinary and necessary expenses paid or

incurred during the taxable year in carrying on any trade or

business".

     Section 6001 and the regulations promulgated thereunder

require taxpayers to maintain records sufficient to permit

verification of income and expenses.   As a general rule, if the

     3
        The $.77 discrepancy between the miscellaneous income
item and the "not-for-profit" rental deduction was not addressed
in the record.
                               - 9 -


trial record provides sufficient evidence that the taxpayer has

incurred a deductible expense, but the taxpayer is unable to

adequately substantiate the amount of the deduction to which he

or she is otherwise entitled, the Court may estimate the amount

of such expense and allow the deduction to that extent.     Cohan v.

Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930).    However, in

order for the Court to estimate the amount of an expense, we must

have some basis upon which an estimate may be made.     Vanicek v.

Commissioner, 85 T.C. 731, 743 (1985).   Without such a basis, any

allowance would amount to unguided largesse.     Williams v. United

States, 245 F.2d 559, 560 (5th Cir. 1957).

     In the case of travel expenses, specifically including meals

and entertainment, as well as certain other expenses, section

274(d) overrides the so-called Cohan doctrine.     Sanford v.

Commissioner, 50 T.C. 823, 827 (1968), affd. per curiam 412 F.2d

201 (2d Cir. 1969); sec. 1.274-5T(a), Temporary Income Tax Regs.,

50 Fed. Reg. 46014 (Nov. 6, 1985).

     Under section 274(d), no deduction may be allowed for

expenses incurred for travel, or certain other expenses, on the

basis of any approximation or the unsupported testimony of the

taxpayer.   Section 274(d) imposes strict substantiation

requirements to which taxpayers must strictly adhere.    Thus,

section 274(d) specifically proscribes deductions for travel

expenses in the absence of adequate records, or of sufficient
                              - 10 -


evidence corroborating the taxpayer's own statement.    At a

minimum, the taxpayer must substantiate:    (1) The amount of such

expense, (2) the time and place such expense was incurred, and

(3) the business purpose for which such expense was incurred.

     Section 274(d)(4) also provides that no deduction is

allowable with respect to listed property, as defined in section

280F(d)(4), unless the deductions are substantiated in accordance

with the strict substantiation requirements of section 274(d) and

the regulations promulgated thereunder.    Passenger automobiles

are included in the definition of listed property in section

280F(d)(4).   Sec. 280F(d)(4)(A)(i).

     To substantiate a deduction attributable to listed property,

a taxpayer must maintain adequate records or present

corroborative evidence to show:   (1) The amount of the expense,

(2) the time and place of the use of the listed property, and (3)

the business purpose for the use.   Sec. 1.274-5T(b)(6), Temporary

Income Tax Regs, 50 Fed. Reg. 46016 (Nov. 6, 1985).

     In order to substantiate a deduction by means of adequate

records, a taxpayer must maintain a diary, a log, or a similar

record, and documentary evidence, which, in combination, are

sufficient to establish each element of each expenditure or use.

Sec. 1.274-5T(c)(2)(i), Temporary Income Tax Regs., 50 Fed. Reg.

46017 (Nov. 6, 1985).   To be adequate, a record must generally be

written.   Each element of an expenditure or use that must be
                              - 11 -


substantiated should be recorded at or near the time of that

expenditure or use.   Sec. 1.274-5T(c)(2)(ii)(A), Temporary Income

Tax Regs., 50 Fed. Reg. 46017 (Nov. 6, 1985).

     Thus, under section 274(d), and as with travel expenses, no

deduction may be allowed for expenses incurred for the use of a

passenger automobile on the basis of any approximation or the

unsupported testimony of the taxpayer.   E.g., Golden v.

Commissioner, T.C. Memo. 1993-602.

Research Expenses

     Petitioner claimed a Schedule A deduction for research

expenses in the amount of $4,125, of which respondent has

conceded $3,443.89.   Of the remaining amount ($681.11), $343.20

relates to petitioner's claim that she is entitled to a deduction

for more mileage than respondent allowed; $108 pertains to

petitioner's contention that section 274(n) does not pertain to

her meals expenses; and $229.91 pertains to miscellaneous

expenses.

     With regard to the mileage expense, petitioner drove from

Rochester, New York, to Portland, Oregon, to attend the Second

International Family Nursing Conference.   Based upon a stipulated

Rand McNally mileage chart, respondent conceded that petitioner
                              - 12 -


was entitled to mileage of 2,752.4     Petitioner contends that the

trip to Portland was 4,000 miles.

     Petitioner testified that she had a "trip-tic" from AAA

which indicated that the mileage to Portland was 4,000 miles;

however, the trip-tic is now lost.     Petitioner presented a repair

bill dated May 15, 1991, the day prior to her departure for

Portland, which indicates an odometer reading of 102,321.

However, nothing in the record indicates petitioner's mileage

upon arrival in Portland.   Other than this repair bill,

petitioner presented no other documentation such as a diary, log,

or similar evidence to substantiate her mileage as required by

section 274.   Thus, petitioner has failed to substantiate the

additional mileage. Moreover, any portion of the trip that could

be considered for personal purposes, such as a sightseeing side

trip, would not be an ordinary and necessary deductible business

expense.   Accordingly, petitioner is not entitled to a deduction

for mileage in excess of the amount previously allowed by

respondent.

     We note that petitioner did not claim a deduction for her

return trip to Rochester, but stated that the return trip was

claimed as a portion of Mr. Ganong's job search expenses.


     4
        Respondent calculated this amount using the mileage from
Rochester, New York, to Buffalo, New York, (78 miles) plus the
mileage from Buffalo, New York, to Portland, Oregon (2,674
miles).
                              - 13 -


However, we believe this expense is properly characterized as a

portion of petitioner's business expenses, and we shall address

this issue now.   Respondent's counsel conceded that petitioner is

entitled to a deduction for such mileage.5   Accordingly,

petitioner is entitled to an additional deduction for mileage

based on 2,662 miles for her return trip to Rochester.

     We now consider petitioner's contention that she is entitled

to a deduction for the full amount of the meals expense and is

not subject to the 20-percent limitation as provided in section

274(n).   Section 274(n) limits the deduction for meals and

entertainment expenses to 80 percent of such expenses.      Section

274(n)(2) provides for certain exceptions to this limitation.

However, petitioner has not shown that any of these exceptions

covers the expenses of meals incurred in connection with her

attendance at a conference, convention, or other similar




     5
        We note that petitioner also drove from Portland to Los
Angeles where she spent the summer working as a consultant.
However, the 1991 return included a Schedule C for her consulting
business, that reflects a deduction for automobile expenses of
$921.91. Inasmuch as we do not know the details of this allowed
deduction, and petitioner has not made a separate claim for the
trip to Los Angeles, we shall not consider this matter any
further.
                               - 14 -


meeting.6   Accordingly, petitioner is only entitled to deduct 80

percent of her meals expenses.

     Petitioner argues that pursuant to IRS Publication No. 17

for 1991, she is entitled to a 100-percent deduction for her

meals expenses.   At trial, petitioner purported to quote a

section of that publication.   However, we were unable to locate

in that publication the section to which petitioner referred at

trial.   Rather, IRS Publication No. 17 for 1991 refers to IRS

Publication No. 463 for 1991 for a list of expenses which are

exceptions to the 80-percent limitation of section 274(n).    In

our examination of IRS Publication No. 463 for 1991, we located

the following paragraph which is identical, with the exception of

the last sentence, to the section which petitioner read at trial:

     TRADE ASSOCIATION MEETINGS. You can deduct expenses
     that are directly related to and necessary for
     attending business meetings or conventions of certain
     exempt organizations. These organizations include
     business leagues, chambers of commerce, real estate
     boards, trade associations, and professional
     associations. The expenses of your attendance must be
     related to your active trade or business. These
     expenses are subject to the 80-percent limit on
     entertainment expenses. (Emphasis added.)

Obviously, petitioner failed to read the last sentence.    Clearly,

IRS Publication No. 463 does not authorize a 100-percent


     6
        Sec. 274(n)(2) includes an exception for certain expenses
that are described in sec. 274(e)(2), (3), (4), (7), (8), and
(9). Sec. 274(e)(6), which refers to expenses related and
necessary to attendance at a business meeting or convention of
certain organizations, is not included as an exception.
                              - 15 -


deduction for petitioner's meals expenses which were incurred to

attend various conventions.   Moreover, we note that petitioner's

reliance on IRS Publications 17 and 463 is misplaced.   We have

previously held that such publications are not authoritative

sources of Federal tax law, and, therefore, do not control the

outcome of issues in this case.   Zimmerman v. Commissioner, 71

T.C. 367, 371 (1978), affd. without published opinion 614 F.2d

1294 (2d Cir. 1979).

     With regard to the remaining amount of $229.91 for

miscellaneous expenses, petitioner presented no testimony or

documentation to support a deduction for this amount.

Accordingly, petitioner is not entitled to a deduction for such

expenses.

Job Search Expenses

     Petitioner claimed a Schedule A deduction for her job search

expenses in the amount of $1,274.80 and for Mr. Ganong's job

search expenses in the amount of $3,378.

     Petitioner testified that the amount claimed for her job

search expenses relates to two separate trips to the Los Angeles

area.   Petitioner claimed $349 related to the first trip which

includes one half of the airfare from Rochester, New York, to Los

Angeles, California, a per diem meals allowance, laundry

expenses, and transportation to and from the airport.   Petitioner

claimed $925.80 related to the second trip which includes
                              - 16 -


airfare, transportation to and from the airport, a per diem meals

allowance, the cost of newspapers, laundry expenses, and

miscellaneous expenses.

     Section 162(a) allows a deduction for ordinary and necessary

business expenses.   Such deductible expenses include those

incurred in searching for new employment in the employee's same

trade or business.   Cremona v. Commissioner, 58 T.C. 219 (1972);

Primuth v. Commissioner, 54 T.C. 374 (1970).   If the employee is

seeking a job in a new trade or business, however, the expenses

are not deductible under section 162(a).   Frank v. Commissioner,

20 T.C. 511, 513 (1953); Hobdy v. Commissioner, T.C. Memo. 1985-

414; Evans v. Commissioner, T.C. Memo. 1981-413.   Petitioner

bears the burden of proving that the expenses were of a business

nature rather than personal and that said expenses were ordinary

and necessary.   Rule 142(a); Welch v. Helvering, 290 T.C. at 115.

     With regard to the trip to Los Angeles from December 15,

1990, through January 7, 1991, petitioner did not present any

documentation or detailed testimony concerning the specific job

search activities in which she engaged during her trip, other

than making telephone calls and mailing resumes.   Moreover, the

record contains no information regarding the amount of time she

devoted to such activity.   Although we believe petitioner engaged

in some job search activities, there were personal reasons for

her to be in Los Angeles.   We think it significant that she
                              - 17 -


stayed in the home she owned in the Los Angeles area, that her

son lived in the home, and that her visit occurred during the

holiday season.   These facts, together with the fact that the

time spent on job search activities was minimal, lead us to

conclude that the primary purpose of the trip was personal and

that the portion of the expenses that could be allocated to any

job search activities would be minimal at best.   Accordingly,

petitioner is not entitled to a deduction for expenses associated

with that trip.

     With regard to the second trip to Los Angeles from December

18, 1991, through December 31, 1991, petitioner presented a daily

calendar for 1991, which indicates that she interviewed at Kaiser

Research Group and CSUN.   In addition, petitioner made telephone

calls related to resumes which she had sent to prospective

employers in the area.   Although the matter is not free from

doubt, due to some of the same circumstances being present as in

the first trip, we conclude that the primary purpose for the

second trip was for business purposes and that petitioner is

entitled to a deduction for job search expenses related to this

trip.

     Petitioner presented an airline receipt for $481 from

American Airlines and testified that she incurred shuttle

expenses of $8.   Accordingly, we shall allow petitioner a

deduction for job search expenses of $489.
                                - 18 -


     Petitioner testified that she incurred miscellaneous

expenses related to her job search activities including newspaper

costs.   Petitioner presented no documentation or detailed

testimony concerning these expenses.     Thus, she is not entitled

to a deduction for these expenses.

     Petitioner also contends that she is entitled to a per diem

deduction for meals expenses for the 14 days during which she was

in Los Angeles.    Rather than requiring that a taxpayer

substantiate the amount of the expenses incurred for meals, a per

diem deduction may be allowed for meals expenses incurred away

from home when a taxpayer satisfies all of the other requirements

of sections 162(a)(2) and 274(d).    Sec. 274(d); sec. 1.274-5T(j),

Temporary Income Tax Regs, 50 Fed. Reg. 46032 (Nov. 6, 1985);

Rev. Proc. 90-60, 1990-2 C.B. 651, 653.    This amount will be

deemed substantiated so long as the elements of time, place, and

business purpose of the travel expenses are substantiated.       Rev.

Proc. 90-60, 1990-2 C.B. 653.    The per diem meals amount includes

incidental expenses such as laundry expenses.    Rev. Proc. 90-60,

1990-2 C.B. 652.   Because petitioner has substantiated the

elements of time, place, and business purpose with respect to her

second job search trip to Los Angeles, she is entitled to a per

diem deduction for meals expenses for her 14-day trip.     The

record does not reflect the allowable per diem amount for Los

Angeles in a situation where housing is not included.      This may
                               - 19 -


have to be resolved in the Rule 155 proceeding.    However, since

the per diem amount includes laundry expenses, she is not

entitled to an additional deduction for laundry expenses.

     We now consider the issue of Mr. Ganong's job-search

expenses.7   Mr Ganong did not testify, and petitioner presented

no detailed testimony or documentation regarding Mr. Ganong's job

search activities.    Moreover, other than the receipt for a plane

ticket, petitioner has presented nothing to substantiate the

amount claimed for Mr. Ganong's job search expenses.    In

addition, based on petitioner's testimony that Mr. Ganong, a

self-employed artist, was seeking employment in the business end

of the art field, such as a gallery, it appears that Mr. Ganong

was seeking a job in a new trade or business.    Based on the

foregoing reasons, petitioner is not entitled to a deduction for

Mr. Ganong's job search expenses.

Not-for-profit Rental

     Petitioner claimed a Schedule A deduction for "not-for-

profit" rental expenses in the amount of $3,417.69.    Petitioner

testified that this amount relates to the mortgage that Mr.

Miller paid during 1991 and for which petitioner included in

income $3,416.92.    Although the facts seem to indicate that

petitioner was an accommodation maker, realizing neither income

     7
        We note that a portion of the disallowed amount has been
allowed as petitioner's return trip from Los Angeles to
Rochester. See supra p. 13.
                              - 20 -


nor expense, both parties characterized this issue as a "not-for-

profit" rental involving the provisions of section 183(b), and we

shall address those issues.

     Pursuant to section 183(b), if an activity is not engaged in

for profit, section 183(b) separates the claimed deductions into

two groups.   Section 183(b)(1) allows only those claimed

deductions which are not dependent upon a profit objective, e.g.,

interest and taxes.   See Brannen v. Commissioner, 78 T.C. 471,

499-500 (1982), affd. 772 F.2d 695 (11th Cir. 1984); Ritter v.

Commissioner, T.C. Memo. 1996-15.    Section 183(b)(2) allows the

balance of the deductions that would otherwise be permitted only

if the activity were engaged in for profit, but only to the

extent that the gross income derived from the activity exceeds

the deductions allowed under paragraph (1).    See Green v.

Commissioner, T.C. Memo. 1989-436.     Depreciation deductions are

subject to the limitations of section 183(b)(2).    Sec. 1.183-

1(b)(1)(iii), Income Tax Regs.

     A loan summary document from the Community Bank, N.A.

(presumably the successor to the original mortgagor) reflects the

details of a loan to petitioner of $44,000 at a 7.25-percent

interest rate, payable in 180 monthly payments, the first 60 of

which were for $366.57.   We attempted to calculate the amount of
                              - 21 -


interest paid during 1991 from this information, but were unable

to arrive at the amount claimed by petitioner.8

     Section 167 allows as a depreciation deduction a reasonable

allowance for the exhaustion, wear and tear of property used in a

trade or business, or property held for the production of income.

Under section 168, depreciation for residential rental property

is calculated based on the straight line method using a recovery

period of 27.5 years.   Sec. 168(a), (b)(3), (c)(1).

     The record does not include the original cost of the land or

completed house.   However, the record does indicate that the cost

to complete the house was at least $44,000.   Assuming the

depreciable basis of the house to be $44,000, the maximum

allowable depreciation deduction would be $1,600.

     We believe, and so hold, that sufficient interest and

depreciation deductions are available to eliminate any gain with

respect to this property; of course, no loss is allowable.

     To reflect the resolution of the issues set forth above,


                                              Decision will be

                                         entered under Rule 155.




     8
        Based on our calculations, the total mortgage payments
for 1991 should have been $4,398.84, consisting of $2,971.91 in
interest and $1,426.93 in principal payments.
