- 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 thePage: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Next
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