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(A) interest paid or accrued on indebtedness
incurred or continued in connection with the conduct of
a trade or business (other than the trade or business
of performing services as an employee), [Tax Reform Act
of 1986, Pub. L. 99-514, sec. 511(b), 100 Stat. 2085,
2246.]
The amended language, effective for the years in issue,
was intended to conform the definition of personal interest
to the language of the related passive loss and investment
interest limitation provisions, to permit consistent
application of a standard for allocation of interest. See
S. Rept. 100-445, at 36 (1988); H. Rept. 100-795, at 35
(1988). There is no indication that the change in language
was intended to make any substantive change in the meaning
of the statutory language.
We then analyzed three opinions: Standing v. Commissioner,
28 T.C. 789 (1957), affd. 259 F.2d 450 (4th Cir. 1958); Polk v.
Commissioner, 31 T.C. 412 (1958), affd. 276 F.2d 601 (10th Cir.
1960); Reise v. Commissioner, 35 T.C. 571 (1961), affd. 299 F.2d
380 (7th Cir. 1962). In each of these opinions we held that the
interest on a tax underpayment was an ordinary and necessary
expense “paid or incurred during the taxable year in carrying on
any trade or business” within the meaning of section 23(a)(1)(A),
I.R.C. 1939, the predecessor of section 162(a). In Standing v.
Commissioner, 28 T.C. at 789-795, we also held that the interest
on a tax underpayment was “attributable to” the taxpayer’s trade
or business within the meaning of section 22(n)(1), I.R.C. 1939,
the predecessor of section 62(a)(1), hence deductible in arriving
at adjusted gross income. In Polk v. Commissioner, 31 T.C. at
415, we noted that the net operating loss language in section
122(d)(5), I.R.C. 1939 (the predecessor of sec. 172(d)(4)), was
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