David Stevan and Karen Ann Brandriet - Page 6




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          "personal" injury from a defendant's conduct is insufficient to             
          satisfy the "physical injury or physical sickness" requirement.             
          Kightlinger v. Commissioner, T.C. Memo. 1998-357.                           
               The jury found Norwest liable for fraudulent                           
          misrepresentation, negligent misrepresentation, and negligent               
          processing of a loan application.  Petitioners did not obtain               
          redress for any physical injury or physical sickness.                       
               Having considered the allegations in the complaint and the             
          jury's verdict, we find that petitioners did not receive the                
          punitive damages in connection with a case involving physical               
          injury or physical sickness.  We hold that petitioners' punitive            
          damages are includable in their gross income.                               
          Issue 2.  Whether Petitioners Are Entitled to a Greater Interest            
                    Expense Deduction3                                                
               Petitioners claimed a $3,000 deduction for interest paid on            
          a consumer loan.  Respondent determined that petitioners are                
          entitled to deduct $238 of the claimed interest expense as a                
          business expense and disallowed the balance.                                
               Respondent's determinations of fact are presumptively                  
          correct, and petitioners bear the burden of proving otherwise.              
          See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).              
          Taxpayers do not have an inherent right to take tax deductions.             
          Deductions are a matter of legislative grace, and a taxpayer                


               3Petitioners raised this issue at trial.  We consider it               
          tried by consent.  See Rule 41(b).                                          





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