John A. Malone and Brenda K. Malone - Page 10

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               Respondent contends that the interest at issue is                      
          nondeductible personal interest under section 163(h) and that               
          section 212 does not apply.B. Limitation on the Deduction of                
                                        Personal Interest                             
               Generally, a taxpayer other than a corporation may not                 
          deduct personal interest.  Sec. 163(h)(1).2  Investment                     

               2Section 163(h) provides in pertinent part:                            
               (h) Disallowance of Deductions for Personal Interest.--                
                    (1)  In General.--In the case of a taxpayer other                 
                    than a corporation, no deduction shall be allowed                 
                    under this chapter for personal interest paid or                  
                    accrued during the taxable year.                                  
                    (2)  Personal Interest.--For purposes of this                     
                    subsection, the term “personal interest” means any                
                    interest allowable as a deduction under this                      
                    chapter other than--                                              
                         (A)  interest paid or accrued on indebtedness                
                         properly allocable to a trade or business                    
                         (other than the trade or business of                         
                         performing services as an employee),                         
                         (B)  any investment interest (within the                     
                         meaning of subsection (d)),                                  
                                 *  *  *  *  *  *  *                                  
                         (D) any qualified residence interest (within                 
                         the meaning of paragraph (3)), and                           
                                 *  *  *  *  *  *  *                                  
                    (3)  Qualified Residence Interest.--For purposes of               
                    this subsection--                                                 
                         (A)  In general.--The term "qualified residence              
                         interest" means any interest which is paid or                
                                                             (continued...)           




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