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trade or business is also not subject to the section
163(d) limitation under present law.
Reasons for Change
* * * * * * *
Nonbusiness (consumer) interest
* * * * * * *
Although the committee believes it would not be
advisable to subject to income tax imputed rental
income with respect to consumer durables owned by the
taxpayer, it does believe that it is appropriate and
practical to address situations where consumer
expenditures are financed by borrowing. By phasing out
the present deductibility of consumer interest, the
committee believes that it has eliminated from the
present tax law a significant disincentive to saving.
* * * * * * *
Explanation of Provisions
In general
The bill expands the scope of the interest
limitation, and alters the calculation of the amount of
the limitation. Under the bill, all nonbusiness
interest is subject to the limitation on deductibility,
including consumer interest and certain interest that
is not treated as investment interest subject to
limitation under present law. Interest subject to the
limitation under the bill does not include interest on
debt secured by the taxpayer’s principal residence (to
the extent of its fair market value), and interest on
debt secured by a second residence of the taxpayer (to
the extent of its fair market value). Interest expense
that is paid or incurred in carrying on a trade or
business is not subject to the interest deduction
limitation under the bill (except for interest
attributable to certain limited business interests).
In general, under the bill, consumer interest is
not deductible, and the deduction for investment
interest is limited to investment income for the year
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