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deductions were claimed. The Court supported its holding by
consulting the legislative history of section 174 and concluding
that Congress intended to level the playing field “between old
and oncoming businesses and the like.” Id. at 504.
In Huntsman v. Commissioner, 905 F.2d 1182, 1184 (8th Cir.
1990), revg. 91 T.C. 917 (1988), the Court of Appeals for the
Eighth Circuit considered section 461(g)(2), which allows a
deduction for points paid “in connection with the purchase or
improvement” of the taxpayer’s principal residence. The issue in
Huntsman was whether a taxpayer who purchased a home with a
short-term 3-year loan secured by a mortgage, and replaced the
short-term obligation with a permanent loan could deduct the
points paid on the permanent loan. The Court of Appeals relied
on Snow, to give “in connection with” a broad construction that
would allow the deduction. Specifically, the Court of Appeals
held that the short-term financing was “an integrated step in
securing the permanent * * * [loan] to purchase the home”,
adopting the reasoning of Judge Ruwe’s dissent in the Tax Court.
Huntsman v. Commissioner, supra at 1185. The Court of Appeals
emphasized that the taxpayers did not refinance their existing
debt to lower their interest rate or achieve some goal not
“directly” connected with home ownership. Id. at 1182.
In Fort Howard Corp. v. Commissioner, 103 T.C. 345, 351
(1994), superseded by legislation and supplemented 107 T.C. 187
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