AMW Investments, Inc. - Page 15

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          has failed to carry its burden of proof.4  Given the fact that              
          the charges stemmed from the personal conduct of the Defendants,            
          we are simply not persuaded that any of the payments made by                
          petitioner to the Fund were petitioner's business expenses.5                
          2.  Interest Expense                                                        
               Respondent disallowed petitioner's $160,000 interest                   
          deduction on the ground that the subject properties were                    
          contributed to petitioner's capital.  Petitioner argues that it             
          may deduct the interest because it acquired the Mishawaka                   
          property and the Clarksville property from Mr. Mohney.                      
               An accrual method taxpayer may deduct interest that has                
          accrued within the taxable year on debt.  Sec. 163(a).  The term            
          "debt" connotes an existing, unconditional, and legally                     
          enforceable obligation for the payment of money.  First Natl. Co.           
          v. Commissioner, 289 F.2d 861 (6th Cir. 1961), revg. and                    
          remanding 32 T.C. 798 (1959).  Whether interest has accrued on              
          debt is a factual determination.  Roth Steel Tube Co. v.                    

               4 Petitioner contends that a criminal conviction against               
          Mr. Mohney would damage petitioner because he was indispensable             
          to it.  We are unpersuaded.  Petitioner has not shown that it               
          would have been inoperable as a result of Mr. Mohney's criminal             
          conviction.  Petitioner has also presented no evidence that it              
          suffered any business decline or any damage to its business                 
          relationships as a result of Mr. Mohney's prosecution and/or                
               5 We also are not convinced that the expenses were ordinary            
          and necessary.  Suffice it to say that petitioner has not proven            
          that they were.                                                             

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