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The conference agreement on H.R. 3838 generally follows
section 1401 of the Senate amendment, relating to limitations on
losses and credits from passive activities, but with certain
modifications and clarifications. H. Conf. Rept. 99-841, at II-
138, supra, 1986-3 C.B. (Vol. 4) at 138. As modified, clarified,
and enacted, section 469 provides, in pertinent part, as follows:
SEC. 469. PASSIVE ACTIVITY LOSSES AND CREDITS LIMITED.
* * * * * * *
(k) Regulations.–-The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
provisions of this section, including regulations–-
* * * * * * *
(4) which provide for the determination of the
allocation of interest expense for purposes of this
section * * *.[1] [TRA 1986 sec. 501(a), Pub. L. 99-514,
100 Stat. 2085, 2233, 2240.]
The Joint Statement of Managers portion of the conference
committee report explaining interest expense allocation under
section 469 provides--
Expenses allocable to portfolio income.–-The
conference agreement provides that portfolio income is
reduced by the deductible expenses (other than
interest) that are clearly and directly allocable to
such income. Properly allocable interest expense also
reduces portfolio income. Such deductions accordingly
are not treated as attributable to a passive activity.
The conferees anticipate that the Treasury will
issue regulations setting forth standards for
1 Sec. 10212(a) of the Omnibus Budget Reconciliation Act of
1987, Pub. L. 100-203, 101 Stat. 1330, 1330-405, redesignated
sec. 469(k)(4) as sec. 469(l)(4).
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