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interest. Sec. 163(h)(2)(A).3 The deductibility as a business
expense of interest on a loan obtained for educational expenses
depends, at least in part, upon whether the educational expenses
themselves are deductible business expenses. See Holmes v.
Commissioner, T.C. Memo. 1993-387.
Petitioner has not established that any expenses she
incurred to obtain her Ph.D., which are, at least in part, the
expenses to which the student loan interest relates, were
deductible education expenses. See sec. 1.162-5, Income Tax
Regs. Consequently, she is not entitled to deduct as a trade or
business expense any portion of the interest paid in 1996 on her
outstanding student loans. See Holmes v. Commissioner, supra.
To reflect the foregoing and to take into account the
Stipulation of Settled Issues,
Decision will be entered
under Rule 155.
3 Sec. 221 allowing a deduction for interest paid on
educational loans was not in effect during the year in issue.
That section was added by the Taxpayer Relief Act of 1997, Pub.
L. 105-34, sec. 202(a), 111 Stat. 806, effective for interest
payments due and paid on any qualified education loan after
December 31, 1997. In addition, sec. 163(h)(2)(F) was added
later to clarify the fact that interest allowable as a deduction
under sec. 221 is not considered personal interest. See the
Omnibus Consolidated and Emergency Supplemental Appropriations
Act of 1999, Pub. L. 105-277, sec. 4003(a)(1), 112 Stat. 2681-
908, effective as if included in the 1997 Act.
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