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passed on to Yoshinori "because personal interest is not
deductible." On the return he filed for 1989, Nakamura reported
$30,000 in interest income from Yoshinori.
Respondent contends that petitioners did not establish that
the Takaos had any loan obligations to anyone in 1989 that
carried any interest obligations in the amounts claimed by the
Takaos, or that the Takaos made any interest payments in that
dollar amount during 1989. Respondent additionally asserts that
petitioners have failed to establish that the claimed interest
constitutes investment interest. Respondent also contends that
the Takaos did not have investment income against which any
investment interest expense may be deducted.
Petitioners presented no evidence showing that the Takaos
used the loan proceeds to which the interest payments relate to
acquire or hold property held for investment as defined in
section 163(d)(5). Thus, they have failed in their burden of
proof on this issue. Accordingly, we sustain respondent's
determination for 1989. In light of our holding, we do not
address respondent's remaining arguments relating to this issue.
1990 Investment Interest Deduction
For 1990, petitioners claim that the Takaos are entitled to
an investment interest deduction of $30,000 for interest they
paid to Nakamura on service charges and on a loan Nakamura made
to Yoshinori in 1990 in order for Yoshinori to make a payment on
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