- 14 -
ordinary income. See sec. 163(d)(3)(B), I.R.C. 1954, as amended
by TRA 1969.
In 1976, Congress revised section 163(d) to reduce the use
of this deduction to shelter noninvestment types of income.14
See sec. 209(a) of the Tax Reform Act of 1976 (TRA 1976), Pub. L.
94-455, 90 Stat. 1542. The definition of investment income
remained unchanged, but the TRA 1976 amendment eliminated any
offset of investment interest expense against long-term capital
gain. Id.
In 1986, Congress expanded the scope of the investment
interest expense limitation and altered the calculation of the
limitation by including “any net gain attributable to the
disposition of property held for investment”. Tax Reform Act of
1986 (TRA 1986), Pub. L. 99-514, sec. 511(a), 100 Stat. 2320; see
H. Conf. Rept. 99-841 (1986), 1986-3 C.B. (Vol. 4) 152, wherein
the conference committee articulated the intent to expand the
definition of investment income “to include the same items as
under * * * [TRA 1976] plus the taxable portion of net gain from
the disposition of investment property.”15 (Emphasis added.)
14 See H. Rept. 94-658, at 102, 1976-3 C.B. (Vol. 2) 695,
794; S. Rept. 94-938, at 106, 1976-3 C.B. (Vol. 3) 49, 144; Staff
of Joint Comm. on Taxation, General Explanation of the Tax Reform
Act of 1976, at 103 (J. Comm. Print 1976).
15 See also H. Rept. 99-426, at 300 (1986) (“[investment
income] also includes the nondeductible portion of net long-term
capital gain on investment property.”); S. Rept. 99-313, at 805
(continued...)
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