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section 274(a)(1)(B) and section 1.274-2(a)(2)(i), Income Tax
Regs. Respondent further contends that pursuant to sec. 1.274-
2(e)(4)(iii), Income Tax Regs., a yacht is considered an
entertainment facility.
Petitioner, does not question respondent’s contention, but
instead counters that the interest deduction is allowable under
section 274(f). That section, entitled “INTEREST, TAXES,
CASUALTY LOSSES, ETC.,” exempts from the section 274 requirements
“any deduction allowable to the taxpayer without regard to its
connection with his trade or business”. With respect to
corporations (taxpayers who are not individuals), section 274(f)
is to be applied as though the taxpayer was an individual. In
that regard, respondent argues that unless petitioner can show an
exception to the general rule of section 163(h) that an
individual’s personal interest is not deductible, no deduction is
permissible.
Petitioner simply argues that the language of section 163(h)
“In the case of a taxpayer other than a corporation,” no personal
interest is allowable, would cause the allowance of an interest
deduction because K&H is a corporation. If this were simply a
matter of applying section 163(h), petitioner’s argument would
ring truer. The section 274 limitations outlined above, however,
specifically address this situation. Those limitations cause
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