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husband as the payor of mortgage interest. Petitioners
correspondingly deducted this interest on their tax return. The
fire insurance policy for Chancery Court lists petitioners, along
with Jack Rice, as the insureds. Under petitioners' names a
further $5,000 was borrowed from Jack Rice against the property
before the deed listing Sid as the owner was recorded.
On the other hand, when Jack Rice was not involved,
petitioners failed to treat themselves as the owners of Chancery
Court. For example, petitioners filed for bankruptcy, the timing
of which coincided with the recording of the deed naming Sid as
the nominal owner of Chancery Court. Petitioners failed to list
Chancery Court or the encumbering mortgage on their bankruptcy
petition. They also failed to list Chancery Court under property
transferred within the past year.
OPINION
Respondent determined that petitioners did not own Chancery
Court during 1988, that they did not use it for the production of
income in that year, and that they did not pay any related
expenses. Respondent therefore disallowed petitioners' claimed
$14,904 loss from Chancery Court in 1988. This disallowance
consisted of $11,369 in mortgage interest and $3,535 in
depreciation.
We do not believe petitioners paid the mortgage. There is
no reliable evidence that petitioners paid it, and most of the
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