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testified that he borrowed from his relatives to pay the bank in
order to “maintain [his] good credit”. In this regard,
petitioner candidly admitted that his relatives were more
flexible (and forgiving) as creditors than was the bank.
At trial, respondent conceded that petitioner was entitled
to a Schedule C deduction for interest expense in the amount of
$1,279. See supra note 2. However, respondent contends that the
repayment of principal on the loan from Providian Bank is not
deductible. We agree.
As we said many years ago, “Deductions are not permitted on
account of the repayment of loans.” Crawford v. Commissioner, 11
B.T.A. 1299, 1302 (1928); see Brenner v. Commissioner, 62 T.C.
878, 883 (1974); Osborne v. Commissioner, T.C. Memo. 2002-11;
Clark v. Commissioner, T.C. Memo. 1994-120, affd. without
published opinion 68 F.3d 469 (5th Cir. 1995).
In the context of the present case, the rationale for the
foregoing rule is readily apparent. Petitioner borrowed against
his line of credit in order to pay operating expenses of the
Pasadena Chinese School; petitioner then deducted such operating
expenses on his Schedule C, which deductions were allowed by
respondent. To allow petitioner to deduct the repayment of
principal would allow him “the practical equivalent of double
deduction.” Ilfeld Co. v. Hernandez, 292 U.S. 62, 68 (1934). As
we have previously held, “The Code ‘should not be interpreted’ to
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