The Son Is Not the Father in Tax Reporting of Paid Interest

The IRS wrongly assessed $667,000 in deficiencies and penalties by incorrectly insisting a taxpayer needed to treat interest expense as his father did, the U.S. Tax Court ruled on Aug. 28.

The case centered around partnership interests William Lipnick received from his father, Maurice Lipnick, who participated in partnerships with Washington-area real estate legend Calvin Cafritz to own and operate rental property.

For 2013 and 2014, William and Dale Lipnick filed joint tax returns arguing that the interest paid by those partnerships on loans was not the “investment interest” it had been under ...