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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
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