- 34 -
Subsequently, in Polk v. Commissioner, supra at 414-415,
this Court held that interest on an income tax deficiency
stemming from the Commissioner's revaluation of the taxpayer's
livestock inventory was deductible as a business expense for
purposes of computing an NOL. In so holding, this Court stated
that the case was "clearly controlled" by Standing. Polk v.
Commissioner, supra at 415. We also stated that the deficiency
interest was deductible as a business expense because the
deficiency "arose in connection with * * * [the taxpayer's]
business, and was proximately related thereto, and that the same
must be said of the interest paid thereon." Id. at 415. We
distinguished Maxcy v. Commissioner, 26 T.C. 526 (1956), on which
the Commissioner relied, by concluding:
The Opinion in that case includes the following (p.
527): “The burden is on * * * [the taxpayer] to
demonstrate the clear allowability of the deduction.
This burden he has failed to carry.”
In the instant case, however, as in Standing,
supra, * * * [the taxpayer's] burden is clearly and
fully met. We have carefully reexamined the problem,
and we see no occasion to depart from the reasoning and
principles established by the Court of Appeals for the
Fourth Circuit, and by this Court, in Standing. [Polk
v. Commissioner, supra at 415.]
On appeal, the Court of Appeals for the Tenth Circuit agreed
that these amounts were deductible. Commissioner v. Polk,
276 F.2d at 604. According to the court, a taxpayer may compute
an NOL by deducting deficiency interest from gross income as a
business expense if the interest is an ordinary and necessary
expense incurred in the operation of the business. The court
stated that the assessment of additional income taxes related to
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