Nick and Helen Kikalos - Page 12

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          cash.                                                                       
          C.  Petitioners' Interest Deduction                                         
               On or about February 10, 1992, respondent assessed                     
          petitioners additional income tax of $286,147.50 for their 1986             
          tax year and $272,146 for their 1987 tax year.  The assessments             
          for 1986 and 1987 resulted from respondent's increase in                    
          petitioners' reported gross business profit for those years,                
          based upon respondent's use of a bank deposits analysis.  In                
          1992, petitioners paid $393,024 in interest on the additional               
          amounts assessed for 1986 and 1987.  Petitioners deducted the               
          amount of the interest payment on their 1992 Federal income tax             
          return.  Respondent disallowed that deduction of $393,024.                  
                                       OPINION                                        
          I.  Petitioners' Records of Income                                          
               Taxpayers must maintain accounting records which enable them           
          to file correct income tax returns.  Sec. 6001;  DiLeo v.                   
          Commissioner, 96 T.C. 858, 867 (1991), affd. 959 F.2d 16 (2d Cir.           
          1992).  Section 6001 provides:                                              
               SEC. 6001. NOTICE OR REGULATIONS REQUIRING RECORDS,                    
               STATEMENTS, AND SPECIAL RETURNS.                                       
                    Every person liable for any tax imposed by this                   
               title, or for the collection thereof, shall keep such                  
               records, render such statements, make such returns, and                
               comply with such rules and regulations as the Secretary                
               may from time to time prescribe. * * *                                 
               In this regard, section 1.446-1(a)(4), Income Tax Regs.,               
          provides in part:                                                           
                    Each taxpayer is required to make a return of his                 



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