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provisions of this subsection of TAMRA were treated as having
been enacted immediately before the enactment of the OBRA-87.
TAMRA sec. 1005(c)(13), 102 Stat. 3392. Therefore, this
amendment had only limited application. However, it is apparent
that Congress did not view section 1041 as requiring the
characterization of interest on indebtedness incurred incident to
divorce as personal interest.
Based on the foregoing, we hold that section 1041 does not
require petitioner's indebtedness to his former wife to be
characterized as personal interest for purposes of section
163(h)(1). Nevertheless, our resolution of this issue does not
determine whether petitioner is entitled to deduct the interest
payments on such indebtedness. Unless the interest is properly
characterized as investment interest, passive activity interest,
or qualified residence interest, petitioner's interest expense
may still be personal under section 163(h)(1) and thus not
deductible. Sec. 1.163-9T, Temporary Income Tax Regs., 52 Fed.
Reg. 48409 (Dec. 22, 1987).
Petitioner contends that the indebtedness to Mrs. Seymour
was secured by a mortgage on his residence and that a portion of
the interest arising from that indebtedness was qualified
residence interest and properly deductible.9 Section 1.163-
8(...continued)
improvements to such residence).
9Respondent does not contest that the mortgage deed securing
(continued...)
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