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policy grounds3. Two articles agree with the Courts of Appeals’
reversals on the statutory interpretation.4 The balance of the
articles comment on the issue and the controversy but appear to
take no position one way or the other.5
One commentator stated:
Temp. Reg. 1.163-9T(b)(2)(i)(A) should be invalidated if it
is inconsistent with other statutes and regulations. It
appears to be in conflict with Temp. Reg. 1.163-
8T(c)(3)(ii), which was also enacted after the Blue Book
explanation was published. This regulation controls when no
loan proceeds are received as follows:
If a taxpayer incurs or assumes a debt in
consideration for the sale or use of property, for
services, or for any other purposes, or takes
property subject to a debt, and no debt proceeds
are disbursed to the taxpayers, the debt is
treated for purposes of this section as if the
taxpayer used an amount of the debt proceeds equal
2(...continued)
Treasury Goes Too Far”, 34 J. Marshall L. Rev. 557, 579-581
(2001); Reynolds, Comment, “Redlark v. Commissioner: A ‘Bird in
the Hand’ for Noncorporate Taxpayers?”, 47 Case W. Res. L. Rev.
751, 795 (1997).
3 Engel, “Deducting Interest on Federal Income Tax
Underpayments: A Roadmap Through a 50-Year Quagmire”, 16 Va. Tax
Rev. 237, 296-297 (1996).
4 Harllee, 536-2nd Tax Mgmt. (BNA), “Interest Expense
Deductions”, at A-113 (1998); Popkin, “The Taxpayers’ Third
Personality: Comments on Redlark v. Commissioner”, 72 Ind. L.J.
41, 61 (1996).
5 7 Mertens, Law of Federal Income Taxation, sec. 26:35, at
93 (2001); Banoff et al., “After Allen, Is There Substantial
Authority for Deducting Interest on Tax Deficiencies?”, 90 J.
Taxn. 377 (1999); Banoff et al., “Two More Courts Reject Redlark
– Interest on Taxes Not Deductible”, 91 J. Taxn. 255 (1999);
Raby, “Deducting Interest on a Form 1040 Deficiency”, 67 Tax
Notes 945, 946 (1995); “Interest on Taxes Never Deductible, Ninth
Circuit Says – Redlark Reversed”, 88 J. Taxn. 260 (1998).
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