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business of the taxpayer, the new language broadens the scope of
section 163(h)(2)(A) to include any trade or business, which in
this case can include a trade or business of Aqua Sun.
Petitioners attempt to distinguish True v. United States, 72
AFTR 2d 93-5660, 93-2 USTC par. 50,461 (D. Wyo. 1993), affd.
without published opinion 35 F.3d 574 (10th Cir. 1994), relied
upon by respondent. On brief, petitioners acknowledge True's
holding that interest paid by an individual shareholder of an S
corporation on a tax deficiency attributable to the business of
the S corporation is not deductible by the shareholder under
section 62(a)(1) as a trade or business expense, which must be
"attributable to a trade or business of the taxpayer". In True,
the District Court held that the interest was not an allowable
trade or business deduction because the S corporation's business
activities were not attributed to the shareholders for purposes
of section 62(a)(1).
Petitioners argue that True v. United States, supra, dealt
with tax years prior to the enactment of present section 163(h).
Consequently, petitioners say, the holding in True has nothing to
do with whether such interest expense is "properly allocable to a
trade or business" under section 163(h)(2)(A). Unlike section
62(a)(1), which requires the trade or business to be conducted by
the taxpayer, petitioners contend that section 163(h)(2)(A)
merely requires that interest be "properly allocable to a trade
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