- 10 -
corporation. Further, it should be remembered that, although the
sale may be treated as having been made at arm's length,
nevertheless the sellers were the fathers of the purchasers, and
at least in some circumstances it would seem more likely that
their consent would not be withheld than in the case of
strangers.
Petitioners contend that the purpose of the new 1986
provisions supports the allowance of the claimed deduction in
their case. To be sure, the legislative history of the 1986 Act
does disclose that Congress was concerned with plugging a
loophole that had permitted taxpayers to take deductions against
their earned income by reason of interest, expenses, losses,
etc., attributable to tax shelters and other arrangements not
related to the taxpayer's trade or business. See H. Rept. 99-426
at 299-300 (1985), 1986-3 C.B. (Vol. 2). And petitioners' rely
upon a statement of the staff of the Joint Committee on Taxation
explaining the reason for the new provisions, as follows:
Under prior law, leveraged investment property was
subject to an interest limitation, for the purpose of
preventing taxpayers from sheltering or reducing tax on
other, non-investment income by means of the unrelated
interest deduction. Congress concluded that the
interest limitation should be strengthened so as to
reduce the mismeasurement of income which can result
from the deduction of investment interest expense in
excess of current investment income, and from deduction
of current investment expenses with respect to
investment property on which appreciation has not been
recognized. [Staff of Joint Comm. on Taxation, General
Explanation of the Tax Reform Act of 1986 at 263 (J.
Comm. Print 1987); emphasis added.]
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011