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both section 1.163-8T, Temporary Income Tax Regs., supra, and
section 1.163-9T(b)(2)(i)(A), Temporary Income Tax Regs., supra,
as applied to the facts presented in Redlark were unreasonable.
Relying on Redlark v. Commissioner, supra, we held in Kikalos v.
Commissioner, T.C. Memo. 1998-92, that the interest on the income
tax deficiencies resulting from the operation of the taxpayer-
husband’s unincorporated trade or business was deductible under
section 163(h)(2)(A) because the interest was properly allocable
to the taxpayer-husband’s unincorporated trade or business.
The Courts of Appeals for the Ninth and Seventh Circuits
reversed our decisions in Redlark v. Commissioner, supra, and
Kikalos v. Commissioner, supra, respectively, and held that
section 1.163-9T(b)(2)(i)(A), Temporary Income Tax Regs., supra,
is a reasonable interpretation of section 163(h). Kikalos v.
Commissioner, 190 F.3d 791, 799 (7th Cir. 1999), revg. T.C. Memo.
1998-92; Redlark v. Commissioner, 141 F.3d 936, 942 (9th Cir.
1998), revg. and remanding 106 T.C. 31 (1996). The Courts of
Appeals for the Fourth and Sixth Circuits also reached the same
conclusion. McDonnell v. United States, 180 F.3d 721, 723 (6th
Cir. 1999); Allen v. United States, 173 F.3d 533, 538 (4th Cir.
1999).7
7 Although the Courts of Appeals for the Fourth and Seventh
Circuits noted the application of sec. 1.163-8T, Temporary Income
Tax Regs., 52 Fed. Reg. 24999 (July 2, 1987) (Allen v. United
States, 173 F.3d 533, 537 (4th Cir. 1999); Kikalos v.
(continued...)
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