Daniel V. Alfaro and Irma L. Alfaro - Page 2




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          all Rule references are to the Tax Court Rules of Practice and                
          Procedure.                                                                    
               After concessions, the remaining issue for decision is                   
          whether petitioners for 1996 are entitled to deduct as                        
          nonpersonal business interest $1,527,695 in interest that                     
          petitioners paid to respondent in 1996 with respect to                        
          petitioners’ Federal individual income tax liabilities for 1982               
          through 1988.                                                                 

                                      Background                                        
               The facts of this case were submitted fully stipulated under             
          Rule 122, and are so found.                                                   
               At the time the petition was filed, petitioners resided in               
          Corpus Christi, Texas.  Hereinafter, all references to petitioner             
          in the singular are to Daniel V. Alfaro.                                      
               During 1982 through 1996 (1996 being the year in issue                   
          herein), petitioner operated a law practice as a sole                         
          proprietorship.                                                               
               After an audit by respondent with respect to petitioners’                
          Federal individual income tax liabilities for 1982 through 1988,              
          respondent determined and assessed against petitioners tax                    
          deficiencies for those years relating solely to additional income             
          from petitioner’s law practice.  In 1995, petitioners entered                 
          into an agreement with respondent with respect to the above tax               







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