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(C) any interest which is taken into account
under section 469 in computing income or loss from
a passive activity of the taxpayer,
(D) any qualified residence interest (within
the meaning of paragraph (3)), and
(E) any interest payable under section
6601 on any unpaid portion of the tax imposed
by section 2001 for the period during which
an extension of time for payment of such tax
is in effect under section 6163 or 6166. [H.
Conf. Rept. 99-841, at I-171 (1986).]
The Joint Statement of Managers portion of the conference
committee report provides, in pertinent part, as follows:
House Bill
Under the House bill, the deduction for nonbusiness
interest of noncorporate taxpayers is limited to $10,000
($20,000 for joint returns), plus net investment income,
plus certain deductible expenditures in excess of rental
income from net lease property. * * *
* * * * * * *
Nonbusiness interest means all interest not incurred in
the taxpayer’s trade or business, including the taxpayer’s
share of interest of S corporations in whose management he
does not actively participate, the taxpayer’s share of
interest expense of limited partnerships in which he is a
limited partner, and the taxpayer’s share of interest
expense of certain trusts and other entities in which he is
a limited entrepreneur.
* * * * * * *
Senate Amendment
The Senate amendment provides that the deduction for
investment interest of noncorporate taxpayers is limited to
net investment income, plus certain deductible expenditures
in excess of rental income from net lease property.
Consumer interest is not deductible. Interest on debt
secured by the taxpayer’s principal residence and a second
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