112 T.C. No. 17
UNITED STATES TAX COURT
ROBERT W. AND JANET L. CARLSON, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 8907-97, 23135-97. Filed April 30, 1999.
P is a shareholder of A, an S corporation. A is
engaged in the business of selling residential timeshare
units to individuals on an installment basis. A elected
under sec. 453(l)(3)(A), I.R.C., to report installment sale
income under the installment method. P, in his capacity as
a shareholder, paid additional tax equal to the interest on
the amount of tax deferred as a result of A's use of the
installment method, as required under sec. 453(l)(3)(A),
I.R.C. Pursuant to sec. 453(l)(3)(c), Ps deducted the
payment as interest on their joint Federal income tax
returns for 1993, 1994, 1995, and 1996. R disallowed the
interest deductions in full on the basis that the interest
constituted nondeductible personal interest under sec.
163(h)(2)(A), I.R.C. and sec. 1.163-9T(2)(i)(B), Temporary
Income Tax Regs., 52 Fed. Reg. 48409 (Dec. 22, 1987).
Held: Ps may not deduct the sec. 453(l)(3)(A), I.R.C.,
interest on the tax incurred by P on installment sales of
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