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Helvering, 290 U.S. 111, 115 (1933). Deductions are a matter of
legislative grace, and petitioner must meet the statutory
requirements for the deduction he is claiming. New Colonial Ice
Co. v. Helvering, 292 U.S. 435, 440 (1934).2
Section 163(a) provides that there shall be allowed as a
deduction all interest paid or accrued within the taxable year on
indebtedness. Section 163(h)(1), however, provides that, in the
case of a taxpayer other than a corporation, no deduction shall
be allowed for personal interest paid or accrued during the
taxable year. Section 163(h)(2) defines “personal interest” to
mean any interest allowable as a deduction other than, inter
alia, “any qualified residence interest”. Sec. 163(h)(2)(D).
Thus, qualified residence interest is deductible under section
163(a).
The term “qualified residence interest” is defined, in
pertinent part, in section 163(h)(3)(A)(i), as any interest paid
or accrued during the taxable year on “acquisition indebtedness
with respect to any qualified residence of the taxpayer”. The
“indebtedness” for purposes of section 163 must, in general, be
an obligation of the taxpayer and not an obligation of another.
2 With respect to Court proceedings arising in connection
with examinations commencing after July 22, 1988, under sec.
7491(a) the burden of proof shifts to respondent in specified
circumstances. The record in this case does not establish the
date on which the examination of each of petitioner’s taxable
years at issue began, and neither party contends that sec.
7491(a) applies here.
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