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against petitioners as we must.18 Petitioners have not shown a
reasonable basis for concluding that any amount of the $320,000
loan, the $250,000 loan, and the $350,000 loan represents
deductible expenses. With respect to the Pacific construction
loan and the First National loans, we are not convinced that the
full amounts of those loans were paid into the project and are
deductible. Given the circumstances of this case and the
inexactitude apparent from petitioners’ evidence, we have no
reasonable evidentiary basis to make an approximation as to the
amount of the deductible expenses which were paid from those
loans. We cannot, as petitioners would have us do, conclude that
the entire amounts of the construction loans were paid into the
Atherton project. We could choose a raw percentage, perhaps as
high as 80 or 90 percent, and apply that percentage to the total
amount of the loans. However, our choice of a percentage would
be mere guesswork with no reasonable evidentiary basis.
5. Interest Expense
The parties stipulated that “During respondent’s audit of
the 1992-generated net operating loss carryover deduction claimed
18Petitioners’ situation in this case is a result of their
own inexactitude and failure to maintain records of their
expenses. Further, we find petitioners’ efforts before trial to
locate any records that might be in the hands of third parties
especially lax. Moreover, Mr. Assaad’s testimony at trial was
confusing, and he repeatedly could not remember seemingly
important facts. His testimony did not help to substantiate his
expenses, and he did not provide any rational basis from which to
estimate those expenses.
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