- 55 -
NationsBank v. Variable Annuity Life Ins. Co., supra at 813-814.
In this case, my answer to each of the above questions is
yes. Therefore, section 1.163-9T(b)(2)(i)(A), Temporary Income
Tax Regs., is valid and must be given "controlling weight".
NationsBank v. Variable Annuity Life Ins. Co., supra at 813-814.
B. An Ambiguous Statute
Section 163(h) was added to the Code by the Tax Reform Act
of 1986, Pub. L. 99-514, sec. 511(b), 100 Stat. 2085, 2246. In
the case of individual taxpayers, section 163(h)(1) disallows a
deduction for all personal interest paid or accrued during the
taxable year. Section 163(h)(2) then provides that all interest
is personal interest unless that interest falls into one of the
five exceptions listed in paragraph (2). The only relevant
exception for our purposes is contained in subparagraph (A),
which provides that the term "personal interest" does not include
"interest paid or accrued on indebtedness properly allocable to a
trade or business”. Sec. 163(h)(2)(A) (emphasis added).
The term "properly allocable" is ambiguous, because Congress
has not indicated the method by which, or the assumptions under
which, taxpayers, the Service, and the courts are to decide
whether a particular indebtedness is "properly allocable" to a
trade or business. Clearly, there is more than one way to
allocate interest. Compare, for example, the asset based
apportionment method found in section 265(b)(2) with the tracing
method outlined in section 1.163-8T(a)(3), Temporary Income Tax
Regs., 52 Fed. Reg. 24999 (July 2, 1987). More importantly, the
statute is silent with respect to the specific issue at hand--
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