- 52 -
have the requisite relationship to the taxpayer's business.
George R. Halswade, M.D., P.C. v. Commissioner, 82 T.C. 686, 698
(1984). Also, "the trade or business of the corporation must be
considered separately from the trade or business of the
shareholders." Markwardt v. Commissioner, 64 T.C. 989, 995
(1975).
Section 163(a)14 allows a deduction for interest paid within
the taxable year on indebtedness; the indebtedness, however, must
be that of the taxpayer taking the deduction. Southern Pacific
Transportation Co. v. Commissioner, 75 T.C. 497, 565 (1980), and
cases cited therein. Even if the taxpayer is ultimately liable
to pay the interest, the taxpayer is not entitled to an interest
deduction unless the liability arises under the indebtedness
agreement. Smith v. Commissioner, 84 T.C. 889, 899-901 (1985),
affd. without published opinion 805 F.2d 1073 (D.C. Cir. 1986).
Section 165(a) allows a deduction for any uncompensated loss
sustained during the tax year. "Losses are deductible only by
the taxpayer sustaining them; they are personal to the taxpayer
and cannot be transferred to another. New Colonial Co. v.
Helvering, 292 U.S. 435 (1934)." Markwardt v. Commissioner, 64
T.C. at 995.
Section 166(a) allows a deduction for any debt which becomes
14SEC. 163. INTEREST.
(a) General Rule.--There shall be allowed as a
deduction all interest paid or accrued within the taxable
year on indebtedness.
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