- 9 -
1985
January $ 43,725 $ 8,042 $ 35,683 $841,673
February 43,725 7,715 36,010 805,663
March 43,725 7,385 36,340 769,323
April 43,725 7,052 36,673 732,650
May 43,725 6,716 37,009 695,641
June 43,725 6,377 37,348 658,293
July 43,725 6,035 37,691 620,602
August 43,725 5,689 38,036 582,566
September 43,725 5,340 38,385 544,181
October 43,725 4,988 38,737 505,445
November 43,725 4,633 39,092 466,353
December 43,725 4,275 39,450 426,903
1985 Total $524,700 $74,246 $450,454
A number of cases have held that even though an underlying
transaction or stated indebtedness is held to be a sham, devoid
of economic substance, and based on an inflated purchase price,
recourse indebtedness associated with the transaction may still
be regarded as genuine and related interest expense may still be
deductible. See, e.g., Rice’s Toyota World, Inc. v.
Commissioner, 752 F.2d 89, 95-96 (4th Cir. 1985), affg. in part,
revg. in part, and remanding 81 T.C. 184 (1983); Coleman v.
Commissioner, 87 T.C. 178, 213 (1986), affd. without published
opinion 833 F.2d 303 (3d Cir. 1987). Where, however, stated
indebtedness associated with such a sham transaction represents
nonrecourse indebtedness, the cases are consistent in disallowing
claimed interest deductions relating to the nonrecourse
indebtedness. See, e.g., Jacobson v. Commissioner, 915 F.2d 832
(2d Cir. 1990), affg. in part, revg. in part, and remanding in
part T.C. Memo. 1988-341; Polakof v. Commissioner, 820 F.2d 321,
324 (9th Cir. 1987), affg. per curiam T.C. Memo. 1985-197; Hulter
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