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property producing income of a type just described or held for
investment) and any interest held by a taxpayer in an activity
involving the conduct of a trade or business which is not a
passive activity and with respect to which the taxpayer does not
materially participate.
Debt is allocated to expenditures in accordance with the use
of the debt proceeds, and, with certain exceptions not pertinent
here, interest expense accruing on a debt during any period is
allocated to expenditures in the same manner as the debt is
allocated from time to time during such period. Sec. 1.163-
8T(c)(1), Temporary Income Tax Regs., 52 Fed. Reg. 25000 (July 2,
1987). Debt is allocated to an expenditure for the period
beginning on the date on which the proceeds for the debt are used
or treated as used under the rules of section 1.163-8T, Temporary
Income Tax Regs., 52 Fed. Reg. 24999 (July 2, 1987), to make the
expenditure and ending on the earlier of the date on which the
debt is repaid or the date on which the debt is reallocated in
accordance with, inter alia, section 1.163-8T(c)(4) and (j),
Temporary Income Tax Regs., 52 Fed. Reg. 25001, 25004 (July 2,
1987). Sec. 1.163-8T(c)(2)(i), Temporary Income Tax Regs., 52
Fed. Reg. 25000 (July 2, 1987). Generally, debt allocated to an
expenditure properly chargeable to capital account with respect
to an asset (first expenditure) is reallocated to another expen-
diture on the earlier of the date on which proceeds from a
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