Richard Gorkes, Jr. and Susan Gorkes - Page 15

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          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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