90 STAT. 1542
PUBLIC LAW 94-455—OCT. 4, 1976 " (g) PREPAID INTEREST.—
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26 USC 461
note.
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" (1) IN GENERAL.—If the taxable income of the tax p a y e r is computed under the cash receipts and disbursements method of accounting, interest paid by the tax p a y e r which, under regulations prescribed by the Secretary, is properly allocable to any period—• " (A) with respect to which the interest represents a charge for the use or forbearance of money, and " (B) which is after the close of the taxable year in which paid, shall be charged to capital account and shall be treated as paid in the period to which so allocable. " (2) EXCEPTION.—This subsection shall not a p p l y to points paid i n respect of any indebtedness incurred in connection with the purchase or improvement of, and secured by, the principal residence of the tax p a y e r to the extent that, under regulations prescribed by the Secretary, such payment of points is an established business practice in the area in which such indebtedness is incurred, and the amount of such payment does not exceed the amount generally charged i n such area." (b) EFEECTIVE D A T E. —
(1) jj^ GENERAL.—Except as provided in paragraph (2), the amendment made by subsection (a) shall apply to amounts paid after December 31, 1975, in taxable years ending after such date. (2) CERTAIN
26 USC 163.
AMOUNTS PAID BEFORE
1977.—The
amendment
made by subsection (a) shall not apply to amounts paid before January 1, 1977, pursuant to a binding contract or written loan commitment which existed on September 16, 1975 (and a t all times the r e after), and which required prepayment of such amounts by the taxpayer. SEC. 209. LIMITATION ON INTEREST DEDUCTION. (a) IN GENERAL.—Subsection (d) of section 163 (relating to limitation on interest on investment indebtedness) is amended— (1) by striking out paragraph s (1) and (2) and inserting i n lieu thereof the following: " (1) IN GENERAL.—In the case of a tax p a y e r othcr than a Corporation, the amount of investment interest (as defined in paragraph (3)(D)) otherwise allowable as a deduction under this chapter shall be limited, in the following order, to — " (A) $10,000 ($5,000, in the case of a separate r e t u r n by a married i n d i v i d u a l), plus " (B) the amount of the n e t investment income (as defined in paragraph (3)(A)), plus the amount (if any) by which the deductions allowable under this section (determined without regard to this subsection) and sections 162,164(a)(1) or (2), or 212 attributable to property of the tax p a y e r subject to a net lease exceeds the rental income produced by such property for the taxable year. I n the case of a trust, the $10,000 amount specified in subparagraph (A) shall be zero. "(2)
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CARRYOVER or DISALLOWED INVESTMENT INTEREST.—The
amount of disallowed investment interest for any taxable year shall be treated as investment interest p a i d or accrued in the succeeding taxable year."; (2) by adding at the end of paragraph (3)(A) the following new sentence: " I f the tax p a y e r has investment interest for the
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