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to the deficiencies to which the interest herein relates are of
such a nature as to permit such interest to constitute a business
expense within the meaning of section 162(a), and therefore of
section 62(a), and, as a result, to be characterized as interest
"on indebtedness properly allocable to a trade or business"
within the meaning of section 163(h)(2)(A)3 in the event that the
temporary regulation is not applicable. We think a review of the
cases decided prior to the enactment of section 163(h)(2)(A), in
respect of the deductibility of interest on income tax
deficiencies as a business expense, will throw light on this
question and is therefore a significant element in our analysis
of the impact of that section on petitioners' claimed interest
deduction. It is to that review that we first turn our
attention.
In Standing v. Commissioner, 28 T.C. 789 (1957), affd. 259
Sec. 163(h)(2)(A) was amended by sec. 1005(c)(4) of the
Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647,
102 Stat. 3342, 3390.
Sec. 163(h)(2)(A), as originally enacted in 1986, provided:
(A) interest paid or accrued on indebtedness
incurred or continued in connection with the conduct of
a trade or business (other than the trade or business
of performing services as an employee), [Tax Reform Act
of 1986, Pub. L. 99-514, sec. 511(b), 100 Stat. 2085,
2246.]
The amended language, effective for the years in issue, was
intended to conform the definition of personal interest to the
language of the related passive loss and investment interest
limitation provisions, to permit consistent application of a
standard for allocation of interest. See S. Rept. 100-445, at 36
(1988); H. Rept. 100-795, at 35 (1988). There is no indication
that the change in language was intended to make any substantive
change in the meaning of the statutory language.
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