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the deduction allowable under this paragraph, but only
if it has previously been returned as income.” P’s
accrued interest, which was accrued when P was tax
exempt and not required to file income tax returns, was
not “returned as income” within the meaning of sec.
1.166-6(a)(2), Income Tax Regs., and P is not entitled
to increase its regular adjusted cost basis for these
amounts.
Robert A. Rudnick, Stephen J. Marzen, James F. Warren, and
Neil H. Koslowe, for petitioner.
Gary D. Kallevang, for respondent.
OPINION
RUWE, Judge: Respondent determined deficiencies in
petitioner’s Federal income taxes in docket No. 3941-99 for 1985
and 1986, as follows:
Year Deficiency
1985 $36,623,695
1986 40,111,127
Petitioner claims overpayments of $9,604,085 for 1985 and
$12,418,469 for 1986.
Respondent determined deficiencies in petitioner’s Federal
income taxes in docket No. 15626-99 for 1987, 1988, 1989, and
1990, as follows:
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