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Petitioners were required to include the interest and dividends
as part of their gross income, and they do not dispute that they
received such amounts. We hold for respondent on this issue.
D. Interest Deductions (Schedule A)
With respect to the tax years 1990 and 1991, respondent
argues that the deduction claimed as home mortgage interest is
actually investment interest and that petitioner is not entitled
to deduct (1) part of the interest pursuant to section 265(a)(2)
and (2) part of the interest pursuant to section 163(d). In the
deficiency notice, respondent provided no such explanation for
the disallowance, nor did respondent specify whether the home
mortgage interest, investment interest, or a combination of the
two was disallowed. Further, the amounts disallowed in the
notice do not coincide with the amounts claimed on the return.
Respondent incorrectly classified the total claimed itemized
deductions as “interest expenses”. One cannot tell from review
of the notice what was allowed or disallowed. No further
explanation is provided in the notice, nor did respondent provide
a breakdown of the items allowed and disallowed.
Rule 142 provides:
(a) General: The burden of proof shall be upon
the petitioner, except as otherwise provided by statute
or determined by the Court; and except that, in respect
of any new matter, increases in deficiency, and
affirmative defenses, pleaded in the answer, it shall
be upon the respondent. As to affirmative defenses,
see Rule 39.
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