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interest expense in those years from what was reflected in the
notice of deficiency.3 Respondent bears the burden of proving
increased deficiencies pursuant to Rule 142(a) and has not
presented sufficient evidence to support such a finding. Thus,
under respondent’s limited concession, petitioners are entitled
to deductions for interest expenses of $3,925 in 1993, $2,774 in
1994, and $1,097 in 1995.
The next concession concerns the travel expenses deducted by
petitioners with respect to the writing/lecturing business.
Petitioners deducted expenses of $4,094, $6,355, and $6,7904 in
1993, 1994, and 1995. Respondent allowed in the notice of
3Respondent’s concession doubles the interest expense
reflected in the notice of deficiency as actually having been
paid in each individual year. The decreases in the amounts
allowed as deductions are due to the notice’s capitalization of
the interest expenses under sec. 263A, which would have resulted
in the dispersion of the expenses across the span of several
years, also drawing into the years in issue expenses incurred
prior thereto. However, contrary to respondent’s position in the
notice of deficiency (which he now concedes), sec. 263A does not
apply to writers. Sec. 263A(h)(1). The parties’ intentions are
unclear with respect to the interrelationship of the concession
concerning capitalization and the concessions of specific amounts
of various expenses. We assume that the parties intended the
conceded amounts to reflect the changes caused by the switch from
capitalization, and that the amounts remaining at issue are those
amounts which petitioners argue were incurred in the individual
years in issue (not in prior years).
4In 1995, petitioners claimed deductions of $3,301 in
“travel expenses” and $3,489 in “other expenses”. The latter
were capitalized travel expenses from prior years. See supra
note 3. Respondent classified all these expenses as “travel
expenses” in the notice of deficiency. We follow this
classification.
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Last modified: May 25, 2011