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interest, we concluded that interest had been received by the
taxpayer. No comparable situation exists in Indeck’s case; Mr.
Polsky was not entitled to interest under a statute, and the
Settlement Agreement specifically negates any contractual
entitlement.
Requirement of Indebtedness
We also agree with respondent and the Polskys that the
disputed $4,856,922 portion of the settlement payment cannot
constitute interest deductible under section 163(a) by Indeck
because there was no indebtedness within the meaning of that
section.
In order for an amount to constitute interest deductible
under section 163(a), it must have been paid or accrued on
“indebtedness”. Midkiff v. Commissioner, 96 T.C. 724 (1991),
affd. sub nom. Noguchi v. Commissioner, 992 F.2d 226 (9th Cir.
1993); Jordan v. Commissioner, 60 T.C. 872 (1973), affd. 514 F.2d
1209 (8th Cir. 1975); Williams v. Commissioner, 47 T.C. 689
(1967), affd. 409 F.2d 1361 (6th Cir. 1968); Kaempfer v.
Commissioner, T.C. Memo. 1992-19. Indebtedness for this purpose
is “an existing, unconditional, and legally enforceable
obligation for the payment of a principal sum”. Howlett v.
Commissioner, 56 T.C. 951, 960 (1971); see also Midkiff v.
Commissioner, supra at 744; Jordan v. Commissioner, supra at 881;
Williams v. Commissioner, supra at 692. In addition, the amount
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