- 2 -
3. Held, further, the $64,000 interest payment
constituted the payment of nondeductible “personal
interest” under sec. 163(h), I.R.C.
Peter U. Boehme and Mary M. Boehme, pro sese.
Ronald T. Jordan, for respondent.
MEMORANDUM OPINION
HALPERN, Judge: By notice of deficiency dated March 31,
2000, respondent determined deficiencies in petitioners’ Federal
income tax for 1995 and 1996 (the audit years) in the amounts of
$2,985 and $140,857, respectively. After concessions, the issues
remaining for decision are (1) whether $400,000 received by
petitioner Mary M. Boehme in 1996 in exchange for her right to
receive certain future annual lottery payments is ordinary income
or capital gain, and (2) whether petitioners are entitled to
deduct, for 1996, $64,000 paid by Mary in connection with the
repayment of loans to her secured by her lottery winnings.
Petitioners raised the latter issue during a hearing in lieu of
trial (the hearing) without objection by respondent.1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years at issue, and
1 Certain adjustments to petitioners’ dependency
exemptions and schedule A itemized deductions for 1996 are
derivative of the adjustments at issue and will be resolved by
our resolution of those adjustments.
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