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It is accepted that these regulations, if not invalid, would
result in our concluding that interest on petitioners’ 1987
underpayment of Federal income taxes is nondeductible personal
interest. We conclude that, taking into account the uncertainty
as to the meaning of the statute, even as informed by the history
of the legislation, these regulations constitute a permissible
interpretation of the statute. As a result, the regulations are
not invalid, and so petitioners’ claimed interest expense
deduction is not allowed under chapter 1.
C. Caselaw Setting of the Issues
We first addressed the validity of section 1.163-8T,
Temporary Income Tax Regs., 52 Fed. Reg. 24999 (July 2, 1987),
and section l.163-9T(b)(2)(i)(A), Temporary Income Tax Regs., 52
Fed. Reg. 48409 (Dec. 22, 1987), in Redlark v. Commissioner, 106
T.C. 31, 34 (1996). At that time, the Court of Appeals for the
Eighth Circuit was the only Court of Appeals that had addressed
the issue, and it concluded that section 1.163-9T(b)(2)(i)(A),
Temporary Income Tax Regs., supra, is not invalid. Miller v.
United States, 65 F.3d 687, 691 (8th Cir. 1995). With all due
respect to the Court of Appeals for the Eighth Circuit, we
concluded in Redlark v. Commissioner, 106 T.C. at 42, 47, that
6(...continued)
20, 1988. TAMRA 1988 sec. 6232(b), 102 Stat. at 3735. The
regulations herein involved were issued before Nov. 20, 1988, and
thus the “sunset” provision of sec. 7805(e)(2) does not apply to
these regulations.
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