Thomas J. Rosser - Page 9




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          that “other interest” includes the interest on the $1,000 car               
          lease, $10,000 that he used to retire an obligation, and $5,000             
          to establish a trust, all for what petitioner contends was for              
          the benefit of an architect who worked on the nursing homes.                
          2  On his 1994 Schedule C for Financial Perspectives, petitioner            
          reported paying mortgage interest of $19,689.65 to State Savings            
          Bank, $44,695.97 to County Savings, and $2,191.37 to Park                   
          National Bank and other interest of $116,240.                               

               5.   Election Under Section 172(b)(3)                                  
               Petitioner claimed a $63,482 net operating loss on his 1994            
          return.  He referred to a “Statement 01" on the return, but he              
          did not file it with the return.  Petitioner faxed respondent a             
          “Form 1040 Supporting Statement 01" on January 9, 1996, which               
          stated that the claimed $63,482 loss was from carryovers of                 
          $30,750 from 1993 and $32,732 from 1991.                                    
               Petitioner did not indicate on his 1991 or 1993 income tax             
          returns that he intended to forgo the then available 3-year net             
          operating loss carryback.  See sec. 172(b)(3).                              
                                       OPINION                                        
          A.   Petitioner’s Interest Deduction                                        
               1.   Whether Petitioner Had a Substantial Investment Intent            
                    in Acquiring the Nursing Homes                                    
               Respondent contends that the interest at issue is not trade            
          or business interest because petitioner used the loans to buy,              
          renovate, and operate the nursing homes and that petitioner held            
          them as investments.  We disagree.                                          








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