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application of our tax laws to conclude that the interest on such
deficiency is not attributable to an indebtedness properly
allocable to a trade or business under section 163(h)(2)(A), in
the absence of clear legislative intent that such a result is
required. Yet, such is the inescapable consequence of adopting
respondent's position.
In light of the foregoing, and with all due respect to the
Court of Appeals for the Eighth Circuit, we hold that, as applied
to the circumstances involved herein, section 1.163-
9T(b)(2)(I)(A), Temporary Income Tax Regs., constitutes an
impermissible reading of the statute and is therefore
unreasonable. Accordingly, we further hold that the interest
involved herein is interest "on indebtedness properly allocable
to a trade or business" and therefore excluded from personal
interest under section 163(h)(2). In so holding, we emphasize
that there will be situations where a Federal income tax
deficiency will not be as narrowly focused as is the case herein
and therefore interest paid on the deficiency may not be said to
constitute an ordinary and necessary business expense allocable
within the meaning of section 163(h)(2)(A). Indeed, the
situation in Miller v. United States, 95-1 USTC par 50,068, 76
AFTR2d 95-5162 (D.N.D. 1994), affd. 65 F.3d 687 (8th Cir. 1995),
which the District Court described as "an obviously improper
income deferral scheme", see supra note 6, can be said to fall
within the latter category.
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