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the carryover of an individual cash-basis taxpayer’s unused
personal interest deduction from one year to the next.
The Thompsons did, however, make a valid payment of interest
early in 1987, when they issued a valid check for $34,340 to
replace the dishonored check they had mailed the previous year
(the extra $340 was a bad check charge). As cash-basis
taxpayers, and under the law applicable for 1987, they would have
been permitted to deduct 65 percent of that amount, or $22,100,
as personal interest. This valid deduction would have been
$5,814 less than the $27,914 actually claimed and used as an
interest deduction on their 1987 return. If the $5,814 excess
amount deducted were added back to their taxable income for 1987,
the Thompsons’ tax liability would have been increased by $1,624.
Accordingly, we conclude that for their taxable year 1987
the Thompsons received a modest tax benefit during the time
McWade and DeCastro were colluding to reduce the Thompsons’ tax
liabilities. There is no evidence that McWade directly
intervened to cause this excess deduction, but there is evidence
that he took an active role in seeing that the prepaid interest
was posted in time to permit full deduction in 1986. We conclude
that the excess deduction of personal interest in 1987 is
improper and not one that would have been extended to other
affected taxpayers. Thus, while it is unclear that McWade
undertook any action to secure the improper deduction, it is also
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