- 10 - interest must be attributable to a trade or business to be deductible, which we found to be the case in Polk v. Commissioner, supra. Clearly, this statement does not support a per se denial of the deduction of deficiency interest in view of the fact that the Court of Appeals affirmed our decision that such interest was an ordinary and necessary expense for net operating loss purposes. It may be that the above-quoted language narrows the types of situations where the ordinary and necessary business expense requirement of section 162 has been satisfied. Indeed, we are satisfied that, given the source of the income tax adjustments herein, i.e., accounting errors in applying cash and accrual methods, petitioners have satisfied any such narrow standard. Reise v. Commissioner, supra (cash versus accrual changes); cf. Polk v. Commissioner, supra (involving inventory valuations). We reject respondent's attack to the extent that it goes beyond the above quotation from Polk and is directed against the pre-section 163(h) decided cases generally. Concededly there is some confusion in the reasoning of the decided cases, but the thrust of their bottomline conclusions is clear. Exceptions will be accorded to the ordinary and necessary provision of section 162 only when there is explicit legislative indication that such a result was intended. Thus, we agree with petitioners that there is a consistent body of pre-section 163(h) case law holding that, at least under limited circumstances such as were involved in Standing v. Commissioner, supra, Polk v. Commissioner, supra, and Reise v. Commissioner, supra, deficiencyPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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