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SWIFT, J., concurring: Two significant facts are clear and
undisputed in this case: (1) Under the express language of
section 163(h)(2)(A), if an interest expense is properly
allocable to a trade or business, then under that statute the
interest expense is deductible; and (2) the interest expense at
issue herein arose from, in connection with, and is allocable to,
petitioners’ business. Accordingly, the interest expense should
be deductible.
Under respondent’s regulation and position herein,
petitioners’ interest expense is not deductible “regardless” of
the fact that it was clearly incurred by petitioners in
connection with, and that it is undisputably allocable to,
petitioners’ business. Respectfully, respondent’s regulation and
position herein should be rejected as an erroneous attempt to
redefine the substantive provision of section 163(h)(2)(A).
I reiterate and emphasize that the statute speaks for
itself. Thereunder, at the least, if an interest expense clearly
relates to and is allocable to a taxpayer’s business, it is
deductible. Respondent’s regulation may provide reasonable
methods for allocating interest between a taxpayer’s business and
personal activities. But if there is no question as to what an
item of interest expense relates to, and is allocable to, then
the statute is clear and, if the expense relates to the
taxpayers’ business, the statute allows the deduction. Because
section 1.163-9T(b)(2)(i)(A), Temporary Income Tax Regs., 52 Fed.
Reg. 48409 (Dec. 22, 1987), in the context of a sole
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