Albert Gordon MacRae and Sheila MacRae v. Commissioner of Internal Revenue

Before us is a petition for review of a decision of the Tax Court of the United States, reported at 34 T.C. 20 . The petitioners are husband and wife who filed joint returns on the cash basis for the taxable years 1952 and 1953. The husband, Albert Gordon MacRae, will hereinafter be called the taxpayer.

The Tax Court sustained the disallowance by the Commissioner of Internal Revenue of amounts paid by taxpayer, claimed by him to represent payments of interest on indebtedness, and hence deductible within the meaning of Section 23 of the Internal Revenue Code of 1939, in the computation of taxpayer’s net income for the years 1952 and 1953.

The Tax Court determined and ordered a deficiency in income tax for the taxable year 1952 in the amount of $23,-998.38, and a deficiency for the taxable year 1953 in the sum of $78,584.32, and an addition to tax under Section 294 (d) (2) of the Internal Revenue Code of 1939, 26 U.S.C. § 294 (d) (2), in the amount of $4,301.14.

The taxpayer urges that the Tax Court erred in holding that the prepayments [claimed by taxpayer to represent payments of interest on indebtedness] on asserted loans for the purchase and carrying of United States Treasury…