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the property between land and any depreciable buildings or other
depreciable improvements. Thus, petitioners have failed to
substantiate Good Shepherd's deductions for depreciation.
Moreover, petitioners have failed to show that any buildings or
other depreciable improvements were placed in service in any
trade or business or profit-making activity during the years in
issue. We already have concluded that, during those years, Good
Shepherd was engaged in preopening activities with regard to the
business of operating a nursing home. Good Shepherd was not then
engaged in any trade or business or other profit-making activity,
and, for that reason alone, Good Shepherd may not claim any
deductions for depreciation for those years.
D. Interest
Section 163(a) states: "There shall be allowed as a
deduction all interest paid or accrued within the taxable year on
indebtedness." Deductible interest is a payment for the use or
forbearance of money. Deputy v. du Pont, 308 U.S. 488, 497
(1940). It is well settled that the indebtedness referred to in
section 163(a) must be genuine, and economic realities govern
over the form in which a transaction is cast. Knetsch v. United
States, 364 U.S. 361, 365-366 (1960). An indebtedness is an
existing, unconditional, and legally enforceable obligation for
the payment of a principal sum. E.g., Landry v. Commissioner, 86
T.C. 1284, 1308 (1986).
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