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the Partnership’s indebtedness were not involved in that opinion.
Petitioner’s reliance on the schedule set forth in Levy v.
Commissioner, 92 T.C. at 1365, is misplaced.
As a result of the reduction to $2,370,000 of the portion of
the Partnership’s total stated indebtedness that is to be
recognized for Federal income tax purposes (see Levy v.
Commissioner, T.C. Memo. 1991-646), the Partnership’s monthly
payments of $43,725 exceeded the allowable monthly interest
expense, and a considerable portion or excess of each monthly
payment remained to reduce principal. We believe that, for
Federal income tax purposes, those excess funds cannot be
ignored. They were paid by the Partnership, and they must be
considered as either interest or as repayments of principal.
Under the economic accrual method of calculating interest
expense, the interest attributable to the use of money for a
period between payments is determined by applying the effective
rate of interest on the loan to the "unpaid balance" of the loan
for that period. See Rev. Rul. 83-84, 1983-1 C.B. 97, 98.
Because the Partnership's monthly payments exceeded the allowable
interest expense, the excess of each payment properly is to be
regarded as a repayment of a portion of the principal.
Accordingly, the portion of each monthly $43,725 payment in
excess of allowable interest (calculated under the economic
accrual method and on only the $2,370,000 portion of the
Partnership’s stated indebtedness that is to be recognized) must
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