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Respondent also determined that petitioners were not entitled
to claimed investment interest expense deductions for 1992 and
1993. Finally, respondent determined accuracy-related penalties
pursuant to section 6662 for each of the years in issue and
additions to tax pursuant to section 6651(a) for petitioners'
failure to timely file their tax returns for each of the years in
issue.2
OPINION
Issue 1. Sale of Restaurant
The first issue for decision concerns the nature of the
transfer of Stanton Mexicatessen to Ms. Eagatatt, that is, whether
petitioners sold the assets of the restaurant to Ms. Eagatatt, as
petitioners assert, or merely gave her a security interest in the
assets of the restaurant, as respondent maintains.
Preliminarily, we note that although petitioners reported the
sale of the restaurant on their 1994 tax return, the transaction in
fact occurred on September 15, 1993. (Petitioners maintain they
reported the loss from the purported sale of the restaurant on
their 1994 tax return on the advice of their accountant.) Because
the transaction occurred in 1993, petitioners are not entitled to
the loss in 1994, and we sustain respondent's determination for
that adjustment for that year. See sec. 165(a). However, because
2 Other adjustments in the notice of deficiency relating
to self-employment taxes are computational and not in dispute.
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