This year, I paid the state of delaware interest on unpaid inheritance tax i owed on a investment property (vacation home) that I inherited years ago. I sold the property this year and the settlement attorney said this interest is an "investment interest expense" and deductable. Is this true?
>
>
>
Maybe this is bogus but what about the logic that says part of the acquisition of the property was the payment of inheritance tax. A payment that had interest due. The interest was not a penalty, but interest on an unpaid debt.
Fine. Let me put it in simpler terms. You cannot deduct the interest on ANY unpaid tax liability. For ANY reason. See Sec. 162. It's against public policy.
-- David M. Woods, EA, ChFC, CLU Woods Financial Services Norwood, MA 02062
The citation you are looking for is not IRC 162, but in TR 1.163-9T. It's too bad that the Tax Court didn't buy my argument in 2003 that this regulation (introduced December 1987) hasn't naturally expired [by 1998] ("temporary" does not mean "forever").
Have something to add? Share your thoughts — no account required.
Ask the community — no account required