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The Senate amendment separated out the investment interest
provisions (in a revised sec. 163(d)) and provided a prohibition
(new sec. 163(h)) on deducting “consumer interest”. The latter
term was defined to exclude “interest paid or accrued on
indebtedness incurred or continued in connection with * * * the
conduct of a trade or business”.
The conference committee reached its agreement on August 16,
1986. Thirteen days later, the staff of the Joint Committee on
Taxation published a summary of the agreement, hereinafter
sometimes referred to as the Joint Committee staff summary.
Twenty days after that, the conference committee published its
report. Thirty-four days after that, the Tax Reform Act of 1986
was enacted. The conference committee generally followed the
Senate’s approach, but changed the language to prohibit any
deduction for “personal interest”. For our purposes, “personal
interest” was defined the same way the Senate bill defined
“consumer interest”. The Joint Committee staff summary stated as
follows:
Interest on underpayments of tax (other than certain
deferred estate taxes) is treated as personal interest under
the provision.
The conference committee explanation includes the following
sentence:
Personal interest also generally includes interest on
tax deficiencies.
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