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With regard to the legal context or climate which existed in
1986, at the time subsection (h) of section 163 was added to the
Code, another commentator has stated:
The problem with the dissent’s reasoning [in our
Redlark opinion, 106 T.C. 31] is that, like the Eighth
Circuit [in Miller v. United States, 65 F.3d 687, 689-
690 (8th Cir. 1995)], it assumes that the statute is
unclear. This assumption is based on the fact that
section 163(h)(2)(A) defines personal interest by
excluding business interest without providing a
specific definition for business interest. The Eighth
Circuit in Miller held that the absence of a definition
of “business interest” created the ambiguity on which
the IRS could hang its hat.
As the Tax Court’s decision illustrates, however,
Congress does not legislate in a vacuum. Under the
prior case law, the interest on an income tax
deficiency resulting from an adjustment involving a
trade or business was treated as interest incurred in a
trade or business. If Congress is deemed to have been
aware of the law at the time it enacted Section
163(h)(2)(A), there was no ambiguity in the statutory
language. [Lipton, “Divided Tax Court Allows Deduction
of Interest on Tax Arising From a Trade or Business”,
84 J. Taxn. 218, 222 (1996).]
Lastly, as I read it, the legislative history relating to
the 1986 and the 1988 relevant legislative changes to section 163
shows that Congress, in disallowing personal interest, was
addressing “consumer” interest, not interest that was
specifically attributable to a taxpayer’s trade or business.
In sum, section 1.163-9T(b)(2)(i)(A), Temporary Income Tax
Regs., 52 Fed. Reg. 48409 (Dec. 22, 1987), is only
interpretative. After 15 years, it is still in temporary form.6
6 Since Nov. 20, 1988, temporary regulations promulgated
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