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1998 Federal income tax. This Court must decide whether
petitioners are entitled to deduct mortgage loan interest with
respect to certain real property and whether petitioners are
entitled to deduct car expenses in an amount greater than that
allowed by respondent.
Some of the facts in this case have been stipulated and are
so found. Petitioners resided in Lafayette, California, at the
time they filed their petition.
During taxable year 1998, petitioner Antonio G. Montoya
(petitioner) was a high school sports coach. For his purported
brokerage business, petitioner also filed a Schedule C, Profit or
Loss From Business, with petitioners’ 1998 Form 1040, U.S.
Individual Income Tax Return. On the Schedule C, petitioner
reported $2,500 in gross income and $11,671 (rounded) in total
expenses for a net loss of $9,171 (rounded).
Respondent disallowed the claimed $4,841 interest expense
deduction and $231 of the claimed $2,845 auto expense deduction.
Section 7491 is inapplicable here because petitioners have
not complied with the requisite substantiation requirements.
Sec. 7491(a)(2)(A).
Section 163(a) allows a deduction for interest paid or
accrued within the taxable year on indebtedness. It is well
settled that the indebtedness upon which such interest is paid or
accrued must be that of the taxpayer taking the deduction. Smith
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