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purposes of calculating a net operating loss carryover. Accord-
ing to the Court of Appeals: "An item of expense is not deduct-
ible as a business expense merely because it arose in connection
with the taxpayer's business and was proximately related thereto.
To be deductible, it must be an ordinary and necessary expense
incurred in the operation of the business". Id. at 602-603. The
Court of Appeals' view of the type of situations in which
interest on a deficiency may be deducted as an ordinary and
necessary expense arising out of the operation of a business is
reflected in the following statement:
Unless it can be said that the failure to properly
evaluate inventories, which form a part of a taxpayer's
return, arises because of the nature of the business,
and is ordinarily and necessarily to be expected,
interest on a deficiency assessment does not arise out
of the ordinary operation of the business and may not
be deducted. [Fn. ref. omitted.]
Id. at 603. This Court in Redlark v. Commissioner, supra at 37,
noted that the above-quoted language might have been intended to
"[narrow] the types of situations where the ordinary and
necessary business expense requirement of section 162 has been
satisfied." In Redlark, however, we indicated that the Court of
Appeals for the Tenth Circuit's test was met under the specific
facts presented. We must now decide whether the facts of the
present case also meet the Court of Appeals' test.
Failure To Pay Self-Employment Tax
Petitioner believed that, for the tax years 1981 and 1982,
he was an employee and therefore not liable for self-employment
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