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deduction that is no less than the amount that would be allowed
under personal interest phase-in rules for each year.
E. Whether Petitioners May Deduct the Interest At Issue as An
Expense for the Production of Income Under Section 212
Petitioners contend that they may deduct the interest at
issue as an expense for the production of income under section
212. We disagree.
Petitioners asserted without explanation in their pretrial
memorandum and posttrial briefs that they may deduct the interest
at issue under section 212. Petitioners have not cited (and we
are not aware of) any case in which a court disallowed interest
deductions under section 163 and allowed them under section 212.
Petitioner testified that petitioners bought Seattle Pump
stock so that he and his family could have jobs. Section 1.212-
1(f), Income Tax Regs., provides that taxpayers may not deduct
under section 212 the costs of seeking employment or placing
oneself in a position to begin rendering personal services for
compensation. The limits of section 163(d) would be undermined
if taxpayers could deduct under section 212 interest which is not
deductible under section 163(d).
We conclude that petitioners may not deduct any of the
interest at issue under section 212.
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