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