- 16 -
simply an incidental example, which unfortunately falls within
the broad spectrum of indebtedness to which the application of
the expenditure method of allocation would be appropriately
applied, a situation which, in and of itself, might not be
sufficient to invalidate the regulation. See Associated
Telephone & Telegraph Co. v. United States, 306 F.2d 824, 833 (2d
Cir. 1962); Brunswick Corp. v. Commissioner, 100 T.C. 6, 16
(1993).
Nor do we think that the reasonableness of the expenditure
method of allocation, as applied to the facts herein, can be
supported by the fact that the Secretary chose the expenditure
method after considering a pro rata apportionment method of
allocation that might have produced a different result in respect
of interest on business-related income tax deficiencies but which
the Secretary viewed as involving "practical and theoretical
problems", at the same time conceding that such problems would
not necessarily preclude the adoption of a pro rata apportionment
method in the future. T.D. 8145, 1987-2 C.B. 47, 50. The fact
of the matter is that any method of allocation would present
similar problems in its application (sections 1.163-8T and 1.163-
9T, Temporary Income Tax Regs., are themselves stark testimony as
to the validity of this observation), but this factor should not,
in and of itself, justify the selection of a method, at least to
the extent that its application produces an unreasonable result.
Moreover, we are not convinced that the reach of section
1.163-8T, Temporary Income Tax Regs., necessarily provides a
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