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responsibility to allocate 10 percent of the distribution to
their current year’s tax liability. We disagree.
This Court follows the rule that in the case of involuntary
payments, respondent is free to apply the payments as he may
choose. Amos v. Commissioner, supra at 69; see also United
States v. Pepperman, 976 F.2d 123, 127 (3d Cir. 1992). The
payment made here in compliance with a levy was involuntary.
Amos v. Commissioner, supra. In short, respondent was entitled
to apply the entire amount received from the levy to petitioner-
husband’s section 6672 liability.
4. Deduction of Loss from Dynatrex, Inc.
Petitioners argue that they are entitled to a so-called
pass-thru loss deduction under section 1366 for payment of a
portion of petitioner-husband’s section 6672 liability.
Petitioners’ theory is that a payment in 1997 of a portion of
Dynatrex, Inc.’s employment tax liability would be deductible by
Dynatrex, Inc., and, since it had no income for 1997, Dynatrex,
Inc., as an S corporation, would have a loss that would pass
through to the shareholders of Dynatrex, Inc.
Initially, we observe that generally a taxpayer may not
deduct payments made pursuant to a section 6672 liability as an
ordinary and necessary business expense under section 162, Smith
v. Commissioner, 34 T.C. 1100 (1960), affd. per curiam 294 F.2d
957 (5th Cir. 1961); Patton v. Commissioner, 71 T.C. 389 (1978),
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