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for purposes of section 163, without regard to the treatment of
the transaction under section 1041.5
Although regulations concerning this issue have not been
adopted,6 further indication of the IRS's position may be found
in Private Letter Rulings.7 In Priv. Ltr. Rul. 89-28-010 (Apr.
6, 1989), the taxpayer incurred a debt, the proceeds of which
were paid to the taxpayer's former spouse pursuant to a marital
settlement agreement. In return, the taxpayer received the
principal residence which, in turn, was used as security for the
debt. Citing Notice 88-74, supra, the IRS concluded that the
interest on the debt will be qualified residence interest for
purposes of section 163(h) and that the taxpayer may deduct such
5Notice 88-74, 1988-2 C.B. 385, 386 further states: "This
announcement serves as an 'administrative pronouncement' as that
term is described in section 1.6661-3(b)(2) of the regulations
and may be relied upon to the same extent as a revenue ruling or
revenue procedure."
6See sec. 1.163-10T(k)(1)(ii), Temporary Income Tax Regs.,
52 Fed. Reg. 48414 (Dec. 22, 1987). Sec. 1.163-10T, Temporary
Income Tax Regs., 52 Fed. Reg. 48410 (Dec. 22, 1987), addresses
the issue of what portion of an interest expense on an
indebtedness secured by a qualified residence constitutes
qualified residence interest. However, this regulation does not
reflect the amendments of the 1987 Revenue Act, nor does it
address circumstances involving a transfer of a qualified
residence between spouses incident to a divorce.
7Although private letter rulings are not precedent, sec.
6110(j)(3), they "do reveal the interpretation put upon the
statute by the agency charged with the responsibility of
administering the revenue laws." Hanover Bank v. Commissioner,
369 U.S. 672, 686 (1962); see Rowan Cos. v. United States, 452
U.S. 247, 259 (1981); Estate of Cristofani v. Commissioner, 97
T.C. 74, 84 n.5 (1991); Estate of Jalkut v. Commissioner, 96 T.C.
675 (1991).
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