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grounds that they were neither business expenses under section
162 nor deductible interest expenses under section 163.
OPINION
Respondent contends that the interest payments on the
promissory note are nondeductible personal expenses. The
interest accrued on funds that were characterized in the
promissory note as petitioner's "medical school tuition and
expenses".3 Therefore, respondent argues that these payments are
of a personal nature and do not qualify as either section 162
business expenses or section 163 interest expenses.
Petitioner's position is that the interest payments are
deductible business expense because settlement of his claim with
DHHS allowed petitioner to avoid his medical service obligation
thereby enabling him to devote more time to his medical practice.
3The Settlement Agreement and Mutual Release signed on
behalf of the Secretary and the petitioner states:
1. Dr. Keane shall pay to the Secretary the principal
sum of one hundred twenty-five thousand dollars
($125,000.00), (representing forty-five thousand eight
hundred and five dollars ($45,805.00) in original principal
(i.e., the monies expended on Dr. Keane's behalf for his
medical school tuition and expenses), plus previously
accrued interest totaling seventy-nine thousand one hundred
ninety-five dollars ($79,195.00) claimed by the Secretary
under 42 U.S.C. Section 254o(b)(1)), plus additional
interest on the unpaid balance compounded at the rate of
seven and twenty-two one-hundreths [sic] percent (7.22%) per
annum, in a single lump-sum payment plus quarterly
installments as set forth in the Promissory Note which is
appended to this Agreement as Attachment 1. [Emphasis
added.]
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