106 T.C. No. 2
UNITED STATES TAX COURT
JAMES E. REDLARK AND CHERYL L. REDLARK, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 4445-94. Filed January 11, 1996.
Ps deducted the amount of interest on the portion
of a deficiency in Federal income tax arising out of
adjustments caused by accounting errors of their
unincorporated business. They claimed that the
interest was properly allocable to business
indebtedness and therefore not personal interest under
sec. 163(h)(2)(A), I.R.C. R disallowed such deduction
on the ground that it was personal interest under sec.
1.163-9T(b)(2)(i)(A), Temporary Income Tax Regs., 52
Fed. Reg. 48409 (Dec. 22, 1987), and limited Ps' total
interest deduction to the amounts allowed by sec.
163(h)(5), I.R.C. Held, sec. 1.163-9T(b)(2)(i)(A),
Temporary Income Tax Regs., is invalid insofar as it
applies under the circumstances involved herein. Held,
further, the amount of the interest so allocated by Ps
is deductible as interest on an "indebtedness properly
allocable to a trade or business" within the meaning of
sec. 163(h)(2)(A), I.R.C.
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