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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Last modified: November 10, 2007