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and that the deduction of the principal of the loan would
effectively duplicate a tax benefit to petitioner. We agree with
respondent’s argument.
After borrowing the funds, petitioner used the proceeds to
purchase lots. The borrowed funds used for the purchase created
a tax basis. The subsequent sale of the lots resulted in either
a profit or loss. At trial, petitioner acknowledged that he
would have reported any gain from the sale of the lots in prior
years by subtracting his cost from the sales price. If
petitioner had suffered a loss, he could have offset other
income.
Regardless of whether petitioner had a gain or loss on the
sale of the lots, the tax benefit of the cost incurred in
purchasing the lots would have been realized in the year of sale.
The repayment of the loan’s principal is a different transaction
from the purchase and sale of the lots and does not create a
deductible business expense. Petitioner was simply returning
borrowed money. See Brenner v. Commissioner, 62 T.C. 878, 883
(1974); Crawford v. Commissioner, 11 B.T.A. 1299, 1302 (1928).
Therefore, we sustain respondent’s determination that petitioner
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