- 6 -
addition, petitioner's father made a $10,521.57 interest payment
to the bank on petitioner's behalf, which payment forms the basis
for the additional interest deduction claimed by petitioners in
this case. All of the interest involved with respect to the
interest deductions in dispute in this proceeding; i.e.
$52,428.12, is attributable to the indebtedness incurred by Stone
Jessup and petitioner pursuant to the above-described line of
credit with the bank.
Respondent disallowed the interest deduction claimed as a
miscellaneous itemized deduction upon the ground that "a note
issued as 'payment' for interest is not the equivalent of cash".2
During 1991, petitioners claimed deductions amounting to
$1,142.88 for the premiums paid for the credit life insurance
policies petitioner was required to obtain pursuant to the above-
discussed credit arrangement with the bank. The bank was the
named beneficiary with respect to each of the relevant life
insurance policies. Respondent disallowed the deductions,
explaining in the notice of deficiency that the "expense related
to the production of corporate income".
OPINION
Deductions for Interest
2Respondent's explanation does not address the portion of
the interest expense deduction attributable to the payment of
interest by petitioner's father on petitioner's behalf. We
consider the different ways in which the interest was "paid" in
separate sections of this opinion.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011