Samuel G. Payte, Plaintiff-appellant, v. United States of America, Defendant-appellee, 626 F.2d 400 (5th Cir. 1980)

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US Court of Appeals for the Fifth Circuit - 626 F.2d 400 (5th Cir. 1980) Sept. 24, 1980

Daniel L. Penner, Fort Worth, Tex., for plaintiff-appellant.

M. Carr Ferguson, Asst. Atty. Gen., Gilbert E. Andrews, Act. Chief, App. Section, Ernest J. Brown, Jonathan S. Cohen, Attys., U. S. Dept. of Justice, Tax. Div., Washington, D.C., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before GOLDBERG, TATE and SAM D. JOHNSON, Circuit Judges.


The taxpayer filed suit seeking a refund of assessed tax liability in the amount of $16,546.90, with additional interest of $3,242.97 and a penalty of $918.13. The district court granted the government's motion for summary judgment, and the taxpayer appeals.

The taxpayer attempted to carry back certain 1971 interest deductions to offset his 1968 tax liability for business income. However, under § 172(d) (4) of the Internal Revenue Code of 1954, 26 U.S.C. § 172(d) (4), only deductions "attributable to a taxpayer's trade or business" may be carried back to offset business income. The issue in this case is whether interest paid by the taxpayer on a promissory note is "attributable to (the) taxpayer's trade or business." Pursuant to an agreement between the partners in 1968, the proceeds of the promissory note were used to purchase the partnership interest of a deceased business partner, following his death in 1969. We hold that interest paid in such circumstances is not attributable to a taxpayer's trade or business within the meaning of § 172(d) (4).

AFFIRMED on the basis of the district court's opinion, 492 F. Supp. 518 (N.D. Tex. 1979).