A number of properties of the taxpayer were sold by the mortgagees under power of sale for less than the amounts owing. The mortgagees required the taxpayer to place new mortgages on his remaining rental property for the balance owing by him to them. The interest on these new loans was non-deductible because its source of income had been lost when the properties were sold.
The taxpayer was permitted to follow the cash method in computing his interest deductions because this method had always been followed by him.