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Respondent also disallowed the investment interest expense
of $66,366 claimed on the 1983 return.
The "explanation of items" attached to the notice of
FPAA for 1983 gives the following explanation of these
adjustments:
INTEREST EXPENSE AND POINT AMORTIZATION
* * * * * * *
The deductions shown on your return as interest
are not deductible because it has not been
established that the amounts were for interest on
a bona fide debt. Consequently, the partnership's
taxable income is increased.
* * * * * * *
In the event that it is determined that there
was an actual investment associated with the
acquisition of the property or that there was
genuine indebtedness on the property, then with
respect to EPIC Associates 83-XII partnership
for the taxable year 1983, this activity was not
engaged in for profit and the allowability of
interest expenses incurred is limited to the
investment income of the taxpayer for the tax-
able year. Consequently, all interest expenses
relative to this activity are not allowable as
deductions against ordinary income, but are
separately stated items subject to the invest-
ment interest limitations.
DEPRECIATION
The deductions shown on your return as
depreciation are not deductible because it has
not been established that a bona fide investment
in depreciable property was made. Consequently,
the partnership's taxable income is increased.
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