- 10 - limit or prohibit the taxpayer from deducting indebtedness interest at all. Section 163(h) provides that for an individual taxpayer, personal interest is nondeductible. Personal interest is defined in section 163(h)(2) as the residual of what remains after considering five enumerated exceptions. These exceptions are: (A) interest paid or accrued on indebtedness properly allocable to a trade or business (other than the trade or business of performing services as an employee), (B) any investment interest (within the meaning of subsection (d)), (C) any interest which is taken into account under section 469 in computing income or loss from a passive activity of the taxpayer, (D) any qualified residence interest (within the meaning of paragraph (3)), and (E) any interest payable under section 6601 on any unpaid portion of the tax imposed by section 2001 for the period during which an extension of time for payment of such tax is in effect under section 6163 or 6166 or under section 6166A (as in effect before its repeal by the Economic Recovery Tax Act of 1981). Section 163(h)(2). The first exception relating to interest paid on a trade or business expense is the only exception that potentially relatesPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011