James E. Redlark and Cheryl L. Redlark - Page 1

          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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