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expenditure. We have already concluded that the payments do not
constitute trade or business expenditures, and petitioner has
offered nothing to show that his interest payments relate to
either passive activity or investment expenditures. We therefore
hold petitioner may not deduct his interest payments under
section 163.
Section 265 - Tax Exempt Income
Respondent argues that section 265 also prevents petitioner
from deducting the interest expenses here at issue. Because the
Court concludes that petitioner's interest payments are not
deductible under either section 162 or 163, we decline to examine
the implications of section 265 on petitioner's scholarship
repayment.
For the foregoing reasons, we sustain respondent's
determination that petitioner is liable for the deficiency
relating to the deduction of his interest payments for 1991,
1992, and 1993.
To reflect the foregoing,
Decision will be entered
under Rule 155.
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Last modified: May 25, 2011