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the loan from Hada. On the return he filed for 1990, 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 1990 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 1990. 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 relates 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 1990. In light of our holding, we do not address
respondent's remaining arguments relating to this issue.
1991 Investment Interest Deduction
For 1991, petitioners contend the Takaos are entitled to an
investment interest deduction of $13,850 for imputed interest on
the loan from Hada.
Respondent contends that petitioners have failed to
establish that any payment was made to Hada during 1991 or that,
if a payment was made, that the payment was not principal.
Respondent additionally asserts that petitioners have failed to
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