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Petitioners contend that they should be permitted to deduct
interest paid on a deficiency arising from disallowed Schedule C
deductions relating to a sole proprietorship, a law firm.
Although section 163(h)(1) disallows personal interest
deductions, the reach of that section is truncated by section
163(h)(2)(A), which excepts interest “properly allocable” to a
trade or business from the definition of personal interest.
Congress did not provide a definition for interest “properly
allocable” to a trade or business. In interpreting what Congress
meant by “properly allocable” to a trade or business, however,
courts should give the phrase “properly allocable” its usual or
plain meaning. United States v. Urrabazo, 234 F.3d 904 (5th Cir.
2000). A reasonable reading of the phrase “properly allocable”
would conclude that the phrase means fairly or correctly relating
to a trade or business. Interest paid on deficiencies arising
from deductions taken by a sole proprietorship should fall within
this class of interest. Courts should only depart from the plain
language of a statute to, “avoid a result so bizarre that
Congress could not have intended it”. Withrow v. Roell, 288 F.3d
199, 203 (5th Cir. 2002). Reaching the conclusion that the
interest paid on a deficiency arising from a sole proprietorship
is “properly allocable” to a trade or business is surely not a
bizarre result.
The intent of Congress is best determined by examining the
language of the statute. Dial One of the Mid-South, Inc. v.
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