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Petitioners contend that amounts deducted under section
216(a)(1) are deductible in computing AMTI because section 216
deductions are not (1) listed in section 56(b)(1)(A)(ii) as
deductions denied in computing AMTI; (2) deductions “for any
taxes described in section 164(a)(1)”; or (3) miscellaneous
itemized deductions.
B. Statutory Predecessor to Section 216
Some historical context may be helpful to understanding the
dispute in this case. Before 1942, tenant-stockholders could not
deduct their shares of real estate taxes and interest paid by
cooperative housing corporations. See Holmes v. United States,
85 F.3d 956, 960 (2d Cir. 1996); Holden v. Commissioner, 27
B.T.A. 530, 538 (1933); Wood v. Rasquin, 21 F. Supp. 211, 213-214
(E.D.N.Y. 1937), affd. 97 F.2d 1023 (2d Cir. 1938). This result
was consistent with the longstanding rule that a taxpayer
generally cannot deduct taxes paid by another taxpayer. Deputy
v. duPont, 308 U.S. 488, 493-494 (1940).
In 1942, Congress enacted section 23(z) of the Internal
Revenue Code of 1939. Revenue Act of 1942, ch. 619, sec. 128, 56
Stat. 826. Section 23(z) was reenacted as section 216 of the
Internal Revenue Code of 1954, ch. 736, 68A Stat. 730. The
Senate Finance Committee report for the bill that became the
Revenue Act of 1942 states in pertinent part:
The bill provides for a new deduction in section
23(z) of taxes and interest paid or accrued by a tenant
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