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Return Positions
On its return for the fiscal year ended November 30, 1994,
Indeck claimed an interest expense deduction of $4,856,922; i.e.,
equal to the (rounded) total of Component (ii) ($4,809,600) and
Component (iii) ($47,321.85) as described in the Settlement
Agreement. The Polskys, on the other hand, reported the entire
$19,886,922 settlement payment as proceeds from the sale of Mr.
Polsky’s Indeck shares on their 1994 return as amended. Indeck
did not issue a Form 1099-INT, Interest Income, to Mr. Polsky
with respect to any portion of the settlement payment made
pursuant to the Settlement Agreement.
Notices of Deficiency
To prevent a “whipsaw” with respect to the proper tax
treatment of the settlement payment, respondent issued
inconsistent notices of deficiency to the petitioners herein.6
In Indeck’s notice, issued on August 13, 1997, after an
examination, respondent determined that Indeck was not entitled
to an interest deduction claimed with respect to $4,856,9227 of
6 Respondent is entitled to defend against inconsistent
results by issuing inconsistent determinations, see Maggie Mgmt.
Co. v. Commissioner, 108 T.C. 430, 446 (1997), and each
determination is entitled to the same presumption of correctness
as if it had been issued separately, see Doggett v. Commissioner,
66 T.C. 101, 103 (1976); Ryan v. Commissioner, T.C. Memo. 1998-
331.
7 The notice of deficiency issued to Indeck disallowed an
interest deduction of $4,856,921, while the notice issued to the
(continued...)
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