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simultaneously pay the amount of the contested tax deficiency to
which the interest being paid is attributable. Petitioners note
that the agreement between DeCastro and McWade permitted the
Thompsons to receive the better of their settlement agreement or
the result of the Tax Court proceedings. Accordingly,
petitioners argue, the Thompsons were, in effect, continuing to
contest the determined deficiencies in this Court within the
scope of Ann. 86-108, sec. C.1.c. Petitioners therefore maintain
that because the Thompsons prepaid only the interest and none of
the contested tax deficiencies, the Thompsons were not entitled,
under Ann. 86-108 section C.1.c., to deduct the interest.
In Perkins v. Commissioner, 92 T.C. 749 (1989), a reviewed
opinion with no dissents, this Court held that a payment
designated as accrued interest made after a notice of deficiency
has been issued is deductible in the year paid, even though the
underlying tax has not been paid. See also Preble v.
Commissioner, T.C. Memo. 1989-208. We based our holding on two
provisions of the Internal Revenue Code: Section 163(a), which
permits a deduction of interest without requiring that the
underlying obligation be paid, and section 461(f), which permits
a deduction of interest in the year in which it is paid, even
though the taxpayer’s liability for the underlying debt is
contested. We concluded that the revenue procedure upon which
section C.1.c. of Ann. 86-108 is based had imposed “an
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