TAX COURT OPINION

Case: Henry O. Igboke & Clara Igboke
Docket Number: 12275-24
Judge: Toro
Opinion Type: bench
Filed: 06/03/2026
Pages: 13

mniteb ~tates max <tCourt Washington, DC 20217 HENRY 0. IGBOKE & CLARA IGBOKE, Petitioners v. Docket No. 12275-24. COMMISSIONER OF INTERNAL REVENUE, Respondent ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is hereby ORDERED that the Clerk of the Court shall transmit to petitioners and respondent a copy of the pages of the transcript of the trial in this case held before Judge Emin Toro at Los Angeles, California, containing the Court's Oral Findings of Fact and Opinion rendered at the trial session at which this case was heard. In accordance with the Oral Findings of Fact and Opinion, a decision will be entered for respondent. (Signed) Emin Toro Judge Served 06/03/26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Bench Opinion by Judge Emin Toro May 21, 2026 3 Henry O. Igboke & Clara Igboke v. Commissioner of Internal Revenue Docket No. 12275-24 THE COURT: The Court has decided to render oral findings of fact and opinion in this case, and the following represents the Court's oral findings of fact and opinion. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. The oral findings of fact and opinion are made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code and Tax Court Rule 152. Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C. (I.R.C. or Code), in effect at all relevant times, regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure. All monetary amounts are rounded to the nearest dollar. In this deficiency case, we address a straightforward issue: can petitioners, Henry O. Igboke and Clara Igboke, claim a deduction for the taxable year 2021 for mortgage interest they did not pay in that year? 25 The answer is no. llii•SH r'}7 3) 406-2 250 I operations~ escribers.net I www.escribers.net 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 FINDINGS OF FACT 4 The following facts are derived from the parties' pleadings and the testimony and Exhibits admitted into evidence at trial. I. The Igbokes' Borrowing and Mortgage Interest Mr. Igboke has been a certified public accountant for more than 30 years and regularly prepares tax returns for his clients. He knows how the federal income tax rules work, including those for the home mortgage interest deduction. In the 2000s, Mr. and Mrs. Igboke entered into loan agreements secured by their residence in Long Beach, California. Around 2003, they borrowed from Bank of America N.A. (Bank of America). They eventually ran into difficulties with that mortgage and were in danger of foreclosure. Around 2006, they agreed that Select Portfolio Servicing, Inc. (SPS) would take over part of 18 the loan. 19 A. Forms 1098 Issued for 2019 20 21 22 23 24 25 For 2019, both SPS and Bank of America issued Forms 1098, Mortgage Interest Statement, with respect to the Igbokes' outstanding loans. In the 2019 Form 1098 issued by SPS, Box 1, labeled "Mortgage interest received from payer/borrower," showed $12,583. The "Principal Activity" box on the form llii•SH r'}7 3) 406-2 250 I operations~ escribers.net I www.escribers.net 1 2 3 4 showed an outstanding principal balance of $339,949. 5 In the 2019 Form 1098 issued by Bank of America, Box 1 showed $7,517. The form also reported an outstanding principal balance of $131,298. 5 B. Refinancing and Forms 1098 Issued for 2020 6 7 8 9 In July 2020, the Igbokes' mortgages were refinanced with SchoolsFirst Federal Credit Union, which used a loan service provider called Cenlar FSB (Cenlar). Cenlar, SPS, and Bank of America each issued a Form 1098 10 for the taxable year 2020 with respect to the Igbokes' 11 loans. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 In the 2020 Form 1098 issued by Cenlar, Box 1 reflected interest of $6,471. The form also reflected an outstanding principal balance of $482,000. In the 2020 Form 1098 issued by SPS, Box 1 reflected interest of $71,618. The form also reported that principal of $339,949 had been paid during the year and that the principal balance at the end of the year was zero. On August 4, 2020, SPS sent the Igbokes a letter stating: "[We are] contacting you because our records indicate that the above referenced account [i.e., the Igbokes' mortgage loan with SPS] has been paid in full as of 07/28/2020." Consistent with this statement, a "Transaction History" report provided by SPS shows no payments of any kind after July 2020. llii•SH r'}7 3) 406-2 250 I operations~ escribers.net I www.escribers.net 1 2 In the 2020 Form 1098 issued by Bank of America, 6 Box 1 reflected interest of $4,900. 3 C. Form 1098 for 2021 4 5 6 7 8 9 10 11 Only Cenlar issued a Form 1098 for 2021 with respect to borrowing by the Igbokes. Consistent with the refinancing, the form reflected that the Igbokes had an outstanding balance of $479,145 on a loan made on July 27, 2020. It also reflected that the Igbokes had paid $18,411 in mortgage interest during 2021. Neither SPS nor Bank of America issued any Forms 1098 for 2021 with respect to any borrowings by the 12 Igbokes. 13 14 15 16 17 18 19 20 21 22 23 24 25 The Igbokes did not have an outstanding loan with SPS in 2021. And the Igbokes did not pay any mortgage interest to SPS during 2021. II. Tax Returns and Examination The Igbokes filed a tax return for 2021. Taking into account other deductions that are not at issue here, the Igbokes claimed total itemized deductions of $47,119. The mortgage interest deduction claimed on the return exceeds the interest amount Cenlar reported on the 2021 Form 1098 by $21,797 ($40,208 - $18,411 = $21,797). The Commissioner examined the Igbokes' 2021 return and issued to the Igbokes a Notice of Deficiency dated June 6, 2024. In the Notice, the Commissioner llii•SH r'}7 3) 406-2 250 I operations~ escribers.net I www.escribers.net 1 2 3 4 5 6 7 8 9 10 11 12 13 disallowed the Igbokes' itemized deductions in full and 7 allowed instead a standard deduction of $26,450. The determination appears to have resulted from the conclusion that the Igbokes were not entitled to deduct mortgage interest in excess of the $18,411 reported by Cenlar. And once that adjustment is made, it is more favorable for the Igbokes to use the standard deduction rather than itemize. This is so because the Igbokes' adjusted itemized deductions, which consist of deductible taxes of $6,711 and deductible mortgage interest of $18,411, add up to $25,122. And that amount is lower than the standard deduction of $26,450. The Notice recomputed the Igbokes' taxable income and tax due for 2021 on this 14 basis. 15 16 The Igbokes timely petitioned this Court for a redetermination. They lived in California when they filed 17 their Petition. 18 III. Trial 19 20 21 22 23 24 25 We tried this case in person on May 18, 2026, during the Court's Los Angeles, California, trial session. During trial, we admitted as evidence documents provided by the Igbokes to the IRS that purport to be (1) a Substitute Form 1098 from SPS for 2021, (2) a letter from SPS to the Igbokes concerning their mortgage interest, and (3) a spreadsheet issued by SchoolsFirst Federal Credit llii•SH r'}7 3) 406-2 250 I operations~ escribers.net I www.escribers.net 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Union. As we discuss in greater detail below, we have 8 serious reservations about the authenticity of the first two documents. We also admitted as evidence two declarations and an affidavit, along with attached exhibits, from a recordkeeper at SPS. SPS produced the declarations, affidavit, and exhibits in response to a subpoena issued by the Commissioner. I. Burden of Proof OPINION The Commissioner's determinations in a notice of deficiency are generally presumed correct, and the taxpayer bears the burden of proving those determinations erroneous. See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933); Merkel v. Commissioner, 192 F.3d 844, 852 (9th Cir. 1999), aff'g 109 T.C. 463 (1997). Typically, taxpayers also bear the burden of proving their entitlement to any deductions claimed. See INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). II. Applicable Legal Principles The rules governing the deductibility of interest are not simple. As a general proposition, section 163(a) allows a deduction for "all interest paid or accrued within the taxable year on indebtedness." But what section 163(a) gives, section 163(h)(1) in part takes llii•SH r'}7 3) 406-2 250 I operations~ escribers.net I www.escribers.net 1 2 3 4 5 6 7 8 9 10 11 12 away when it comes to individuals. Under the latter 9 provision, individuals may not deduct "personal interest," a term defined in section 163(h)(2). Not all is lost, however, because the definition of "personal interest" excludes from its scope "qualified residence interest," another defined term. See I.R.C. § 163(h)(2)(D). "Qualified residence interest" means any interest paid or accrued during the taxable year on either acquisition or home equity indebtedness with respect to a taxpayer's qualified residence. I.R.C. § 163(h)(3)(A). A taxpayer's qualified residence includes his principal residence within the meaning of section 121. I.R.C. § 13 163(h)(4)(A). 14 15 16 17 18 19 20 21 22 23 24 25 There are various rules and exceptions for determining whether a given interest payment is deductible. But, in every case relevant here, the statute requires that interest must be "paid or accrued within the taxable year." I.R.C. § 163(a); see also I.R.C. § 163(h)(3)(A). And for cash-basis taxpayers, the interest generally must be paid within the taxable year. See, e.g., Smoker v. Commissioner, T.C. Memo 2013-56, at *9 (explaining that a cash-basis taxpayer "may not deduct any accrued but unpaid interest until he actually discharges his obligation to pay the accrued interest"). These rules suffice to resolve this case. llii•SH r'}7 3) 406-2 250 I operations~ escribers.net I www.escribers.net 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 III. Application to the Igbokes 10 At trial, Mr. Igboke testified that the Igbokes had no loan with SPS in 2021 and paid no interest to SPS in 2021. Under section 163(h), Mr. Igboke's admissions establish that the Igbokes are not entitled to the mortgage interest deduction they claim, because the interest was not paid, nor for that matter was it accrued, during the taxable year. See I.R.C. § 163(a), (h)(3)(A). Mr. Igboke offers two documents to support the Igbokes' entitlement to the additional interest deduction. The first document has the general appearance of a Form 1098 and was purportedly sent by SPS to the Igbokes. It is labeled "Mortgage Interest Statement - Substitute Form 1098" and indicates that it relates to the 2021 tax year. It states in Box 1 that Mr. and Mrs. Igboke paid $71,618 of mortgage interest in 2021, and in Box 2 that the Igboke's outstanding mortgage principal was $339,949. The mortgage origination date in Box 3 is March 24, 2006. The second document is a letter dated June 4, 2025, that purports to be from SPS to the Igbokes. It states in relevant part: "Dear Henry Igboke: SPS is in receipt of your recent request for information about the account. Our records show that for calendar year 2021, you paid a total mortgage interest of $31,635." Ex. 1002- 25 R, at 3. llii•SH r'}7 3) 406-2 250 I operations~ escribers.net I www.escribers.net 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Mr. Igboke argues that these documents 11 adequately substantiate the Igbokes' additional interest deduction for 2021. But the documents do not hold up under scrutiny. First, SPS's recordkeeper could not find copies of either document in SPS's records. Even more troubling, the alleged Substitute Form 1098 for 2021 appears to be an altered photocopy of the 2020 Form 1098 from SPS. All the numbers on the purported 2021 form are identical to those from 2020, including the interest paid and loan balance. But, on the purported 2021 form, the year 2020 has been replaced with 2021, and there appear to be irregular photocopier markings around the year. An SPS legend has been added at the top of the form, along with a banner that reads "Mortgage Interest Statement - Substitute Form 16 1098." 17 18 19 20 21 22 23 24 25 Further, the June 2025 letter that SPS allegedly sent the Igbokes is inconsistent with the Igbokes' claimed deduction for 2021. If the Igbokes had paid $31,635 in interest to SPS for 2021 in addition to the $18,411 they paid to Cenlar for that year, they would have been entitled to deduct $50,046 of mortgage interest on their 2021 return. At trial, Mr. Igboke provided no explanation for why the Igbokes claimed a lower amount on their 2021 return. Moreover, the Transaction History provided by SPS llii•SH r'}7 3) 406-2 250 I operations~ escribers.net I www.escribers.net 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 refutes Mr. Igboke's claims and shows no payments of any 12 kind after July 2020. When pressed about these details, Mr. Igboke admitted that the Igbokes had no outstanding loan with SPS in 2021 and paid no interest to SPS in 2021. He said he did not recall when SPS sent the purported Substitute Form 1098 for 2021 and denied altering the form. Instead, he asserted that SPS sent the form because the Igbokes were unable to deduct the full $71,618 of interest that they paid to SPS in 2020. Thus, Mr. Igboke contends, SPS told him that the Igbokes could carry over some portion of the undeducted amount to 2021. According to Mr. Igboke, this was the reason SPS sent him the Substitute Form 1098 for 2021 and the letter. Mr. Igboke says he relied on this advice from SPS despite his 30 years of experience as a CPA and SPS's lack of authority to create tax rules. We do not credit Mr. Igboke's explanation. When asked, Mr. Igboke could not identify any provision from the Code or any other authority that would have denied a portion of the Igbokes' deduction in 2020 and allowed a carryover of the balance to 2021. Nor have the Igbokes established any facts that would support applying an exception to the general rule for the deductibility of mortgage interest. See, e.g., I.R.C. § 163(d)(2) (permitting amounts of "investment interest" llii•SH r'}7 3) 406-2 250 I operations~ escribers.net I www.escribers.net 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 disallowed in a taxable year to be carried forward to the 13 next year); I.R.C. § 163(h)(4)(F) (requiring amortization of certain prepayments of mortgage insurance that relate to future years); I.R.C. § 461(g) (requiring amortization of certain prepayments of interest that relate to future years). As but one example, the Igbokes have not demonstrated that they made interest payments in 2020 for which they did not claim a deduction in that year so as to be entitled to any carryover amount. Additionally, Mr. Igboke's explanation, even if it were accepted, would not explain the Substitute Form 1098 that SPS purportedly issued to him in 2021. As Mr. Igboke admitted, SPS received no interest payments from the Igbokes in 2021 because there was no outstanding loan. As reflected on the 2020 Form 1098 and other records provided by SPS, that is because the loan balance was paid in full in July 2020. This being the case, there would be no reason for SPS to issue another Form 1098 to the Igbokes in 2021 repeating the same information that was included on the 2020 form. Tellingly, SPS's recordkeeper could not find a copy of the purported Substitute 2021 Form 1098 or the 2025 letter in SPS's files. This fact and the discrepancies noted above strongly suggest that these documents are not authentic and were created for the llii•SH r'}7 3) 406-2 250 I operations~ escribers.net I www.escribers.net purpose of supporting the Igbokes' claimed deduction. 14 In short, the Igbokes have fallen far short of carrying their burden in this case. IV. Conclusion The Igbokes have not established that they are entitled to their claimed additional mortgage interest deduction. They admit that they had no loan with SPS in 2021 and that they paid no interest to SPS in that year. Their carryover argument is unsupported by law and relies on documents that appear to have been altered and are inconsistent with SPS's records. Accordingly, we conclude that the Igbokes are not entitled to deduct the amount they claimed as mortgage interest relating to SPS in 2021. To reflect the foregoing, Decision will be entered for respondent. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 11:28 a.m., the above-entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 llii•SH r'}7 3) 406-2 250 I operations~ escribers.net I www.escribers.net