- 14 -
legislative history and approve a regulation denying such a
deduction. See Tanner v. Commissioner, 45 T.C. at 148-149, 151.
Against the foregoing background, we consider the regulatory
framework and legislative history that relate to the
deductibility of interest on income tax deficiencies. Section
1.163-9T(b)(1)(I), Temporary Income Tax Regs., 52 Fed. Reg. 48409
(Dec. 22, 1987), specifically references section 1.163-8T,
Temporary Income Tax Regs., by providing that interest is not
personal interest if it is "paid or accrued on indebtedness
properly allocable (within the meaning of � 1.163-8T) to the
conduct of a trade or business". Additionally, paragraph (b)(3)
of section 1.163-9T, Temporary Income Tax Regs., 52 Fed. Reg.
48410, further references section 1.163-8T, Temporary Income Tax
Regs., "for rules for determining the allocation of interest
expense to various activities". Such being the case, we deal
first with the impact of section 1.163-8T, Temporary Income Tax
Regs., noting that respondent makes only a passing reference to
the regulation without advancing any argument as to its
application to this case, and that petitioners completely ignore
it.
Section 1.163-8T, Temporary Income Tax Regs., establishes an
allocation method based on the expenditure, i.e., the use, of the
debt proceeds. It provides in paragraph (c)(1):
(c) Allocation of debt and interest expense--(1)
Allocation in accordance with use of proceeds. Debt is
allocated to expenditures in accordance with the use of
the debt proceeds and, * * *. * * * debt proceeds and
related interest expense are allocated solely by
reference to the use of such proceeds, and the
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011