- 124 - for the production or collection of income. Section 163(a) generally allows a deduction for all interest paid or accrued during the taxable year on indebtedness. How- ever, in the case of a taxpayer other than a corporation, section 163(h) generally disallows any deduction for "personal interest". The term “personal interest” is defined to mean any interest allowable as a deduction under chapter 1 of the Code other than, inter alia, interest paid or accrued on indebtedness properly allocable to a trade or business (other than the trade or busi- ness of performing services as an employee), any investment interest, and any interest which is taken into account under section 469 in computing income or loss from a passive activity of the taxpayer. Sec. 163(h)(2)(A), (B), and (C). The term “investment interest” means, in general, any interest allowable as a deduction under chapter 1 of the Code which is paid or accrued on indebtedness properly allocable to property held for investment. See 163(d)(3)(A). Investment interest does not include, inter alia, any interest which is taken into account under section 469 in computing income or loss from a passive activity of the taxpayer. Sec. 163(d)(3)(B)(ii). Although investment interest and interest which is taken into account under section 469 in computing income or loss from a passive activity of the taxpayer are excepted from the definition of the term “personal interest”, the deductibility of the first two types of interest is subject to certain other limitations. See secs. 163(d)(1), 469(a).Page: Previous 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 Next
Last modified: May 25, 2011