- 7 -
interest deduction; in particular whether the interest is “on
indebtedness properly allocable to a trade or business”, within
the meaning of section 163(h)(2)(A), and therefore exempt from
the general disallowance rule of section 163(h).
Petitioners contend that the $69,617 interest qualifies for
the exemption from the disallowance rule and that a regulation to
the contrary is invalid, relying on this Court’s opinions to that
effect. In the alternative, they contend that the regulation is
not an authoritative interpretation of the applicable statutory
language, the regulation having been issued before the statutory
language was enacted.
Respondent relies on the regulation as an authoritative
interpretation of an ambiguous statute and notes that the Courts
of Appeals of five different circuits have come to the same
conclusion. As to the prior opinions on which we relied in
invalidating the regulation, respondent’s brief states that “It
is therefore respondent’s position that pre-section 163(h) case
law is irrelevant to the resolution of the instant case.” In the
alternative, respondent contends that, if we were to conclude
“that deficiency interest attributable to a trade or business is
deductible, then an allocation of the deficiency interest in this
case to the Schedule C adjustments and to the Schedule A
adjustments for the 1987 year, will be required.”
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011