After several years of a difficult marriage, Donald and Marla agreed to a divorce. As part of the property settlement, Marla transferred to Donald corporate stock, a commercial building, and a personal residence. Donald transferred other property to Marla, but the fair market value if the property was $600,000.00 less than the fair market value of the property Marla had transferred to him. To equalize the settlement, Donald agreed to pay Marla $600,000.00 payable over 10 years at 8% interest. For several years, Donald deducted the interest on his Federal income tax return as investment interest. Upon audit, the IRS disallowed the interest deduction, classifying it a non-deductible personal interest. Donald believes and has asked you to find support for the deduction.
What are the different types of interests
What are the IRSrules related to the deductibility of each type for tax purposes
What section of IRS code is the IRS using to justify the disallowance?>
What can I offer to support the deduction and defend that the interest is indeed investment related.
What is the strategy to resolve this difference with the IRS>