Dwight E. and Leslie E. Lee - Page 5

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            were placed in a number of alleged trades involving options in                            
            U.S. Treasury obligations. These trades were to function as                               
            alleged "hedges" against losses in the gold trades.                                       
                  In the present cases, the stipulation of settled issues                             
            resolved all the issues before the Court except whether                                   
            petitioners are entitled to investment interest expense                                   
            deductions resulting from Peng Partners' participation in the FTI                         
            A/C transactions.  The investment interest expense deductions in                          
            issue are as follows:                                                                     
                              Year                    Amount                                          
                              1977                    $6,618                                          
                              1978                    29,957                                          
                              1979                    18,037                                          
                              1980                    17,771                                          

                                             Discussion                                               
                  Respondent's determination that the claimed interest expense                        
            deductions are not deductible is presumptively correct, and                               
            petitioners bear the burden of proving that respondent's                                  
            determination is erroneous.  Rule 142(a); INDOPCO, Inc. v.                                
            Commissioner, 503 U.S. 79, 84 (1992); Welch v. Helvering, 290                             
            U.S. 111, 115 (1933).  The fact that these cases are fully                                
            stipulated does not relieve petitioners of that burden.  Borchers                         
            v. Commissioner, 95 T.C. 82, 91 (1990), affd. 943 F.2d 22 (8th                            
            Cir. 1991).                                                                               
                  Section 163(a) generally permits the deduction of "all                              
            interest paid or accrued within the taxable year on                                       




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