- 7 - apply to petitioner. However, since stock is generally productive of dividends, the Commissioner contends that the stock here is covered by section 163(d)(5)(A)(i), notwithstanding that the Russon Brothers stock has, in fact, never paid a dividend. Accordingly, the argument continues, the Russon Brothers stock is "property held for investment", and, as such, petitioners' deduction for the interest is limited to their investment income. If this case were to be decided under the Code as it existed prior to enactment of the Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2085, petitioners might be entitled to prevail. Under prior law, the term "investment interest" was defined as "interest paid or accrued on indebtedness incurred or continued to purchase or carry property held for investment." Sec. 163(d)(3)(D). At that time, the phrase "property held for investment" had not been defined in the Code or the regulations. Recklitis v. Commissioner, 91 T.C. 874, 907 (1988). To determine whether interest should be subject to the limitations of then section 163(d)(1)1, the Tax Court looked to whether the taxpayer 1 The 1985 version of section 163(d)(1) provides: (1) In general.--In the case of a taxpayer other than a corporation, the amount of investment interest * * * otherwise allowable as a deduction under this chapter shall be limited, in the following order, to-- (A) $10,000 ($5,000, in the case of a separate return by a married individual), plus (B) the amount of the net investment income * * * by which the deductions allowable under thisPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
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