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Henry and Esther claimed interest expense deductions on their
joint individual Federal income tax returns for payments made on
the FirsTier note as follows:
Year Amount of deduction
1986 Unknown
1987 $64,199
1988 $57,987
1989 Unknown
1990 $72,540
Henry and Esther did not claim interest deductions on the
FirsTier note or the Chevrolet debt after 1990; however, they did
continue to carry over their unused interest deductions from 1990
until at least 1996.
G. Delinquent Returns of Henry and Esther
Henry and Esther filed their 1989, 1990, 1992, 1994, and
1996 Forms 1040, U.S. Individual Income Tax Return, late. As
part of their 1992 tax return, Henry and Esther filed a Form
8275, Disclosure Statement, with attachments. Henry and Esther’s
1996 return also contained a disclosure statement, but the
statement was not made on Form 8275.
Henry failed to file an individual income tax return for
1995.
H. Notices of Deficiency
Respondent examined Henry and Esther’s 1990, 1991, 1992,
1993, and 1994 tax returns and prepared an “Individual Income Tax
Return Substitute for Return” for Henry with filing status
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