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C. Applicability of Section 163(h)(2)(A)
Petitioners argue for the first time on brief that the
$64,000 interest payment is deductible under section 163(h)(2)(A)
as “interest paid or accrued on indebtedness properly allocable
to a trade or business”. We assume that that argument represents
an attempt by petitioners to link the loans to Mary’s business
use of petitioners’ personal residence. The Schedule Cs included
in petitioners’ returns for the audit years indicate that Mary
was engaged in a business (conducted on a cash basis) referred
to variously as “model train painting” (1995) or “professional
custom painting” (1996). The Form 8829, Expenses for Business
Use of Your Home, for 1995 states that 37.96 percent of
petitioners’ residence was used regularly and exclusively for
business. For 1996, such business use percentage is stated to be
15.4 percent.
As a general rule, this Court will not consider issues
raised by a party for the first time on brief when to do so will
prevent the opposing party from presenting evidence or arguments
that might have been offered had the issue been timely raised.
Graham v. Commissioner, 79 T.C. 415, 423 (1982). In this case,
respondent notified the Court of his intention not to file a
reply brief for the reason that his opening brief “adequately
disposes of the relevant factual and legal aspects of this case.”
Respondent has thereby failed to object to petitioners’ argument
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