                        T.C. Memo. 2002-309



                      UNITED STATES TAX COURT



      DANIEL V. ALFARO AND IRMA L. ALFARO, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8940-00.              Filed December 23, 2002.



     Kenton E. McDonald, for petitioners.

     Elizabeth Owen and Bruce M. Wilpon, for respondent.



                        MEMORANDUM OPINION


     SWIFT, Judge:   Respondent determined a deficiency in

petitioners’ Federal income tax for 1996 in the amount of

$31,717.

     Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the year in issue, and
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all Rule references are to the Tax Court Rules of Practice and

Procedure.

     After concessions, the remaining issue for decision is

whether petitioners for 1996 are entitled to deduct as

nonpersonal business interest $1,527,695 in interest that

petitioners paid to respondent in 1996 with respect to

petitioners’ Federal individual income tax liabilities for 1982

through 1988.


                              Background

     The facts of this case were submitted fully stipulated under

Rule 122, and are so found.

     At the time the petition was filed, petitioners resided in

Corpus Christi, Texas.   Hereinafter, all references to petitioner

in the singular are to Daniel V. Alfaro.

     During 1982 through 1996 (1996 being the year in issue

herein), petitioner operated a law practice as a sole

proprietorship.

     After an audit by respondent with respect to petitioners’

Federal individual income tax liabilities for 1982 through 1988,

respondent determined and assessed against petitioners tax

deficiencies for those years relating solely to additional income

from petitioner’s law practice.    In 1995, petitioners entered

into an agreement with respondent with respect to the above tax
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deficiencies, and in 1996, petitioners paid to respondent a total

of $1,527,695 in accrued statutory interest relating thereto.

     The parties have stipulated and we find that petitioners’

above income tax liabilities for 1982 through 1988 are properly

allocable to petitioner’s law practice.   The stipulation reads as

follows:


     The tax compromised by * * * [petitioners and respondent]
     was tax on income received by Petitioner in his Schedule C
     law practice for legal fees earned in connection with the
     settlement of a personal injury lawsuit. As such, the tax
     arose entirely from Petitioner’s trade or business.


     On petitioners’ joint Federal individual income tax return

for 1996, petitioners claimed an interest expense deduction on

Schedule C, Profit or Loss From Business, relating to the above

$1,527,695 in interest that petitioners paid to respondent in

1996.

     After an audit relating to petitioners’ 1996 Federal income

tax return, on July 6, 2000, respondent issued to petitioners a

notice of deficiency for 1996 in which respondent disallowed the

above claimed $1,527,695 interest expense deduction.


                           Discussion

     Section 163(a) provides generally that taxpayers may deduct

interest paid on an indebtedness.   Section 163(h)(1), however,

provides that individual taxpayers may not deduct “personal”

interest.
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     Section 163(h)(2)(A) provides that interest paid on

indebtedness properly allocable to a trade or business does not

constitute personal interest.   In section 163 no distinction is

made between interest paid on business-related indebtedness owed

by individual taxpayers and interest paid on business-related

indebtedness owed by other types of taxpayers.

     Respondent’s temporary regulation, however, provides that

interest paid specifically on income tax liabilities of

individuals, regardless of the source of the income or other

adjustments to which the tax liabilities relate, is to be treated

as personal interest.   Sec. 1.163-9T(b)(2)(i)(A), Temporary

Income Tax Regs., 52 Fed. Reg. 48409 (Dec. 22, 1987).

     Respondent argues that because the $1,527,695 in interest

that petitioners paid to respondent in 1996 relates to

petitioners’ individual income tax liabilities, under section

1.163-9T(b)(2)(i)(A), Temporary Income Tax Regs., supra, that

interest should be treated as nondeductible personal interest.

     Petitioners contend that section 1.163-9T(b)(2)(i)(A),

Temporary Income Tax Regs., supra, is invalid, that section

163(h)(2)(A) calls for an allocation of interest paid between

business and nonbusiness interest without discrimination against

taxpayers who are individuals, and that because the income giving

rise to petitioners’ tax liabilities for 1982 through 1988 is

indisputably allocable to petitioner’s trade or business (namely,
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to petitioner’s law practice), under section 163(a) and (h), the

related $1,527,695 in interest paid on those tax liabilities is

likewise allocable to petitioner’s trade or business and should

be deductible.

     Petitioners cite Redlark v. Commissioner, 106 T.C. 31

(1996), revd. and remanded 141 F.3d 936 (9th Cir. 1998), and

Kikalos v. Commissioner, T.C. Memo. 1998-92, revd. 190 F.3d 791

(7th Cir. 1999), and a body of presection 163(h) caselaw (see

Reise v. Commissioner, 35 T.C. 571 (1961), affd. 299 F.2d 380

(7th Cir. 1962), Polk v. Commissioner, 31 T.C. 412 (1958), affd.

276 F.2d 601 (10th Cir. 1960), and Standing v. Commissioner,

28 T.C. 789 (1957), affd. 259 F.2d 450 (4th Cir. 1958)), in which

cases it was held that individual taxpayers were entitled to

deduct interest on their Federal income tax liabilities relating

to income from a sole proprietorship business.

     After trial and the filing of briefs in this case, we

decided Robinson v. Commissioner, 119 T.C. 44 (2002), which also

involved the deductibility of interest paid by an individual

taxpayer to respondent with respect to the taxpayer’s Federal

income tax liability relating to income from the taxpayer’s law

practice.   In Robinson, we concluded that section 1.163-

9T(b)(2)(i)(A), Temporary Income Tax Regs., supra, is valid, that

presection 163(h) caselaw was inapplicable, that we would no

longer follow our opinion in Redlark v. Commissioner, 106 T.C. 31
                               - 6 -

(1996), and that interest paid on individual tax liabilities

relating to income from a sole proprietorship is to be treated as

nondeductible personal interest.     Robinson v. Commissioner, supra

at 46-49, 62, 75.   Our conclusion in Robinson is in accord with

opinions of the Courts of Appeals for the Fourth, Sixth, Seventh,

Eighth, and Ninth Circuits and is controlling herein.     See

Kikalos v. Commissioner, 190 F.3d 791, 798-799 (7th Cir. 1999),

revg. T.C. Memo. 1998-92; McDonnell v. United States, 180 F.3d

721, 723 (6th Cir. 1999); Allen v. United States, 173 F.3d 533,

538 (4th Cir. 1999); Redlark v. Commissioner, 141 F.3d 936, 937-

938, 942 (9th Cir. 1998), revg. and remanding 106 T.C. 31 (1996);

Miller v. United States, 65 F.3d 687, 691 (8th Cir. 1995).

     Although strong arguments are available in support of the

claimed deductions at issue herein (see the dissenting opinions

in Robinson v. Commissioner, supra at 96-121), we are compelled

to conclude in the instant case that the $1,527,695 in interest

petitioners paid on their individual income tax liabilities

relating to income from petitioner’s law practice is to be

treated as nondeductible personal interest.

     For the foregoing reasons,



                                       Decision will be entered for

                                  respondent.
