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BellSouth Telecomms., Inc., 269 F.3d 523 (5th Cir. 2001).
Congress defined the types of interest excepted from “personal
interest” by direct references to other code sections, except for
interest “properly allocable” to trade or business income. From
this it can be inferred that the intent of Congress was to use
the plain meaning of the term “properly allocable” to trade or
business interest. In section 163(h)(2)(B), Congress refers to
section 163(d) for a definition of investment interest. In
section 163(h)(2)(C), Congress refers to section 469 for the
definition of portfolio interest. In section 163(h)(2)(D),
Congress refers to section 163(h)(3) for a definition of
qualified residence interest. In section 163(h)(2)(E), Congress
refers to section 6601. Finally, in section 163(h)(2)(F),
Congress refers to section 221 for a definition of interest on
educational loans.
Congress also provided some indication of what constitutes
interest “properly allocable” to trade or business in section
469(e), relating to the passive activity loss rules. The meaning
of “properly allocable” may be determined by looking at
adjoining words and phrases. Simmons v. United States, 308 F.2d
938, 943-944 (5th Cir. 1962). Sections 469(e)(1)(A)(i)(II) and
(III) provide:
Sec. 469(e) Special Rules for Determining Income or Loss
From a Passive Activity.--For purposes of this section–-
(1) Certain income not treated as income from
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