- 9 - their behalf. According to petitioners, this amount is not includable in their gross income because the Turners paid the interest directly to Union Planters. We agree with respondent. Contrary to petitioners' assertion, the Turners did not pay Union Planters directly. They remitted their payments to NBA, which collected the payments on behalf of petitioners. NBA, in turn, remitted the payments to Union Planters to apply to the debt owed it by petitioners. Instead of requiring that the Turners obtain third-party financing for their purchase of the home, petitioners personally financed the Turners' purchase, allowing them to wrap their debt to petitioners around the debt that petitioners already owed Union Planters. In such a wraparound situation, petitioners' gross income includes the interest that the Turners paid NBA on petitioners' behalf. See sec. 1.61-7(a), Income Tax Regs. 2. Deductible Rental Loss Respondent determined that petitioners were entitled to deduct only $25,000 of the $73,129 loss that they reported for Harris Enterprises. Respondent generally determined that petitioners had not substantiated $42,955 of the expenses which went into the reported loss, and, with respect to the recomputed loss of $30,174, that petitioners were limited by section 469 from deducting currently more than $25,000. Petitioners argue that they should be allowed to deduct the reported loss in full.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011