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year and treated as investment interest for that year. Sec.
163(d)(2).
Section 163(d)(5)16 defines property held for investment to
include (i) property which normally produces income described in
section 469(e)(1), and (ii) an interest in an activity involving
the conduct of a trade or business which is not a passive
activity and in which the taxpayer does not materially
participate. Sec. 163(d)(5); Russon v. Commissioner, 107 T.C.
263, 268-269 (1996). Income described in section 469(e) includes
16 Sec. 163(d)(5) provides as follows:
(5) Property held for investment.--For purposes of
this subsection--
(A) In general.--The term "property held for
investment" shall include--
(i) any property which produces income of a
type described in section 469(e)(1), and
(ii) any interest held by a taxpayer in an
activity involving the conduct of a trade or
business--
(I) which is not a passive activity, and
(II) with respect to which the taxpayer
does not materially participate.
(B) Investment expenses.--In the case of property
described in subparagraph (A)(i), expenses shall be
allocated to such property in the same manner as under
section 469.
(C) Terms.--For purposes of this paragraph, the
terms "activity", "passive activity", and "materially
participate" have the meanings given such terms by
section 469.
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