- 11 -
that the interest relating to the nursing homes is trade or
business interest. See sec. 163(d)(3)(A).2
Petitioner contends that he may deduct interest on $1,000
that he borrowed to pay for a car lease, $10,000 that he used to
retire an obligation, and $5,000 that he used to establish a
trust, all to pay an architect who worked on the nursing homes.
We disagree. There is no evidence petitioner borrowed these
amounts for an architect or that these amounts were payment for
work on the nursing homes. We conclude that interest that
petitioner paid to acquire the car lease, retire the obligation,
and establish a trust was not trade or business interest.
2. Whether the Interest Relating to the Nursing Homes Is
the Expense of the S Corporation and Not of Petitioner
Respondent contends that petitioner may not deduct the
interest that petitioner paid to buy, renovate, and operate the
nursing homes because it is an expense of the S corporations,
citing Hewett v. Commissioner, 47 T.C. 483, 488 (1967); Hudlow v.
Commissioner, T.C. Memo. 1971-218; and Strasburger v.
Commissioner, T.C. Memo. 1962-255, affd. 327 F.2d 236 (6th Cir.
1964).
2 Interest allocable to the trade or business of providing
services as an employee is nondeductible personal interest. See
sec. 163(h)(2)(A). That limitation does not apply here because
petitioner was not an employee; instead, he earned self-
employment income through his Schedule C activity.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011