James E. Redlark and Cheryl L. Redlark - Page 17

                                       - 17 -                                         
          sufficient basis for validating, under all circumstances, the               
          specific provision of section 1.163-9T, Temporary Income Tax                
          Regs.  Thus, section 1.163-8T(b)(5), Temporary Income Tax Regs.,            
          52 Fed. Reg. 25000 (July 2, 1987), defines personal expenditure             
          to mean "an expenditure that is not a business expenditure" and             
          section 1.163-8T(c)(3)(ii), Temporary Income Tax Regs., 52 Fed.             
          Reg. 25001 (July 2, 1987), provides:                                        
                    (ii)  Debt assumptions not involving cash                         
               disbursements.  If a taxpayer incurs or assumes a debt                 
               in consideration for the sale or use of property, for                  
               services, or for any other purpose, or takes property                  
               subject to a debt, and no debt proceeds are disbursed                  
               to the taxpayer, the debt is treated for purposes of                   
               this section as if the taxpayer used an amount of the                  
               debt proceeds equal to the balance of the debt                         
               outstanding at such time to make an expenditure for                    
               such property, services, or other purpose.                             
               Under this provision, it would appear permissible to analyze           
          the elements of the income tax indebtedness to determine whether            
          its imputed expenditure is properly allocable to business                   
          activity.  Indeed, such an interpretation would be consistent               
          with the overall legislative purpose in enacting section 163(h),            
          namely to end the deduction for interest incurred to fund                   
          consumption expenditures.  S. Rept. 99-313 at 804 (1985), 1986-3            
          C.B. (Vol. 3) 804; H. Conf. Rept. 99-841 at II-154 (1986), 1986-3           
          C.B. (Vol. 4) 154.  To conclude that an income tax deficiency is            
          ipso facto a consumption expenditure begs the issue.  Thus, aside           
          from our conclusion that the regulatory provisions contained in             
          section 1.163-8T, Temporary Income Tax Regs., are unreasonable as           
          applied to the facts herein, it is possible to conclude that the            
          provisions are sufficiently elliptical so that the validity of              




Page:  Previous  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  Next

Last modified: May 25, 2011