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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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