Edwin A. Helwig - Page 20

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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            
               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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Last modified: May 25, 2011