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sometimes used funds from the real estate business account to
finance farm operations.
Banks made short-term unsecured loans to petitioner. They
did not require petitioners to identify the purpose of the loans.
In his records, petitioner charged the interest to the
account that he used to pay the interest. He kept no records of
how he used his funds.
Petitioners concede that petitioner's corporation paid the
following interest that petitioners deducted on their income tax
returns for 1990: (1) $1,620 to New-East Bank; (2) $1,177 to
Southern National Bank; (3) $527 to Standard Bank and Trust; (4)
$1,168 to United Carolina Bank; and (5) $570 to Mary McCullen.
Petitioners also concede that petitioner's corporation paid the
following interest that petitioners deducted on their income tax
returns for 1991: (1) $3,590 to New-East Bank; (2) $956 to Mary
McCullen; (3) $1,796 to South Carolina National Bank; (4) $1,432
to Barclay's America; and (5) $594 to First Citizens Bank.
Petitioner's corporation also deducted this interest for 1990 and
1991.
Petitioner used his checkbooks to create ledgers for his
farm and other business accounts. Petitioner did not have a
formal balance sheet or income statement for his businesses. He
gave an informal annual financial statement to banks when he
needed a loan.
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Last modified: May 25, 2011