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expenses are deductible for 2001. Petitioners may not reduce the
$17,995 received in 2001 by amounts they claim to have paid for
labor.
b. Interest Expense
Petitioners reported interest income totaling $10,491 for
2001 as follows: (1) $1,253 from Western; (2) $7,387 from EAPC;
(3) $1,831 from Pacific; and (4) $20 from “other”. Petitioners
contend that they had interest expenses in that amount. We
disagree. The interest was not an expense of petitioners if it
was paid to them by their S corporations. Statements in a tax
return are admissions and are not overcome without cogent
evidence that they are wrong. Waring v. Commissioner, 412 F.2d
800, 801 (3d Cir. 1969), affg. per curiam T.C. Memo. 1968-126;
Estate of Hall v. Commissioner, 92 T.C. 312, 337-338 (1989); Lare
v. Commissioner, 62 T.C. 739, 750 (1974), affd. without published
opinion 521 F.2d 1399 (3d Cir. 1975). There is no evidence that
petitioners had $10,471 of interest expenses in 2001.
Petitioners’ Schedule B is inconsistent with their claim for
a $10,471 interest deduction because it states that petitioners’
corporations paid $10,471 to petitioners. Thus, Mr. Arnold did
not make these interest payments, and apparently, these payments
do not relate to Mr. Arnold’s leased payroll activity.
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