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contend CFC owned the notes at all times, and CFC concedes the
interest is includable in its income. Because we have held that
Mr. Cordes owned the 1994 and 1995 notes, Mr. Cordes must include
in income the interest on those notes, in accordance with his
concessions and section 61(a)(4).
Mr. Cordes has not addressed respondent’s contention that if
Mr. Cordes owned the notes, he is liable for self-employment tax
on the interest.21 By virtue of his failure to address the self-
employment tax issue, Mr. Cordes is liable for self-employment
tax on that income. See also sec. 1.1402(a)-5(b), Income Tax
Regs., for specific inclusion.
III. Repossession Costs Deduction
CFC deducted costs incurred and paid in connection with
repossessing certain vehicles in 1994 and 1995, including the
costs associated with repossessing vehicles which secured the
1994 and 1995 notes. The parties stipulated that CFC incurred,
paid, and deducted costs of $6,879 in 1994 and $16,175 in 1995 in
21The extent of Mr. Cordes’s argument regarding self-
employment tax is as follows:
XI. EDMUND J. CORDES IS NOT LIABLE FOR SELF-EMPLOYMENT
TAX FOR THE TAXABLE YEARS 1994 AND 1995.
Petitioner contends the omitted interest income
relating to the discounted notes is income to Cordes
Finance Corp., not to Petitioner. Any other income as
a result of constructive dividends would not be subject
to self employment taxes.
IRC �1401(a) imposes a tax only on the self
employment income of an individual and Edmund J. Cordes
had no self employment income in 1994 or 1995.
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