- 55 -
petitioners have failed to establish that the Takaos, who owned
stock in Norager, were personally liable on the debt to Pier 29,
or that they had an interest in the property during the years at
issue. Accordingly, we sustain respondent's determination on the
investment interest issue for 1988. In light of our holding, we
do not address respondent's remaining arguments relating to this
issue.
1989 Investment Interest Deduction
For 1989, petitioners claim that they are entitled to an
investment interest deduction of $38,355, consisting of the
carryover of investment interest from 198817 plus $30,000
interest Yoshinori paid to Nakamura on amounts Yoshinori owed
Nakamura. Nakamura testified that the $30,000 represented
expenses he had incurred relating to an earlier audit that he had
17 In the Government's brief, respondent erroneously stated
that the Takaos claimed an investment interest expense deduction
of $55,320 on Schedule A--Itemized Deductions of their 1988
return. The Form 4952, Investment Interest Expense Deduction,
filed with the Takaos' 1988 return shows "Interest expense on
investment debts paid or accrued" in 1988 in the amount of
$55,320, "Allowed investment interest expense" in the amount of
$49,299, and "Disallowed investment interest expense" in the
amount of $6,021. The Takaos reported "Deductible investment
interest" in the amount of $49,299 on Schedule A for 1988. The
Form 4952 filed with the Takaos' 1989 return shows "Investment
interest expense paid or accrued" in 1989 in the amount of
$32,334, "Allowed investment interest expense" in the amount of
$38,355, and "Disallowed investment interest expense" in the
amount of zero. The Takaos reported "Deductible investment
interest" in the amount of $38,355 on Schedule A for 1989.
Petitioners do not explain the $2,334 discrepancy in the amount
of investment interest expense they claimed they paid in 1989 on
Form 4952 ($32,334) and the amount they now claim in their brief
($30,000). In light of our holding on the 1989 investment
interest deduction, see infra, we do not resolve the discrepancy.
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