- 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
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