William W. Brown - Page 5

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               Petitioner timely filed a 2001 Federal income tax return.              
          On August 13, 2003, respondent mailed a notice of deficiency to             
          petitioner with respect to the 2001 tax year.  Petitioner timely            
          filed a petition on April 10, 2006.3                                        
               Based on the foregoing facts, which are not in dispute,                
          petitioner argues that the portion of his loan payments                     
          applicable to the principal should be deductible as a business              
          expense.  Respondent argues that to allow petitioner a deduction            
          for repayment of the principal on the loan would essentially                
          allow a “double deduction”.  Respondent argues that petitioner              
          used the loan to purchase the lots and established petitioner’s             
          tax basis in them.  Respondent notes that each of the five lots             
          that secured the loan was sold before 2001, and that any gain or            
          loss on the sale of those lots should or could have already been            
          reported on petitioner’s returns for years before 2001.                     
          Summarily, respondent’s argument is that petitioner has, or could           
          have, already recovered the cost of the lots when they were sold,           

               3 Petitioner filed a ch. 13 petition in the U.S. Bankruptcy            
          Court for the District of New Jersey on Sept. 5, 2000.  In 2000,            
          the filing of a ch. 13 petition triggered an automatic stay which           
          prohibits the commencement of a proceeding in the Tax Court                 
          concerning the debtor.  See 11 U.S.C. sec. 362(a)(8) (2000).  The           
          automatic stay was lifted on Jan. 10, 2006, when the bankruptcy             
          court entered an order granting petitioner a discharge under ch.            
          13 of the Bankruptcy Code.  Due to the automatic stay, the                  
          running of the time for petitioner to file a petition in this               
          Court was suspended, which allowed him to file a timely petition            
          after the discharge from bankruptcy.  See sec. 6213(f)(1).                  

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