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reasonable. Plainly, an expenditure made for Federal income
taxes is not an expenditure made in consideration of any specific
property or service received by the taxpayer. The payment of
Federal income taxes is a civic duty, not a matter of business
contract or investment advantage. All taxpayers, as well as
others (citizens and noncitizens) receive benefits on account of
the funding of the Federal Government. The payment of Federal
income taxes reduces a taxpayer's wealth otherwise available for
consumption. Thus, Federal income tax payments exhibit
characteristics not common to business (or investment)
expenditures. Justice Holmes made a point that serves nicely to
emphasize the nonbusiness aspect to tax payments: "Taxes are
what we pay for civilized society". Compania General de Tabacos
de Filipinas v. Collector of Internal Revenue, 275 U.S. 87, 100
(1927) (Holmes, J., dissenting).
If Federal income taxes constitute consumption, and not a
trade, business, or investment expense, then, under a tracing
rule, such as the rule of section 1.163-8T, Temporary Income Tax
Regs., the inescapable, and reasonable, conclusion is that any
deficiency interest, or interest on a borrowing to pay income
taxes, is personal interest. The taxpayer's purpose for
borrowing the money, or the reason the deficiency arose (e.g.,
"my accountant made a mistake!") simply is irrelevant. Though
that approach may appear wooden, it is unambiguous.
The rule found in section 1.163-9T(b)(2)(i)(A), Temporary
Income Tax Regs., and invalidated by the majority, is nothing
more than a fact-specific application of section 1.163-8T,
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