PUBLIC LAW 97-34—AUG. 13, 1981
95 STAT. 271
"(2) the excess of the amount of interest received by the taxpayer during such taxable year (less the amount of any deduction under section 62(12)) over the amount of qualified 26 USC 62. interest expenses of such taxpayer for the taxable year. "(c) DEFINITIONS.—For purposes of this section— "(1) INTEREST DEFINED.—The term 'interest' means— "(A) interest on deposits with a bank (as defined in section 581), "(B) amounts (whether or not designated as interest) paid, in respect of deposits, investment certificates, or withdrawable or repurchasable shares, by— "(i) an institution which is— "(I) a mutual savings bank, cooperative bank, domestic building and loan association, or credit union, or "(II) any other savings or thrift institution which is chartered and supervised under Federal or State law, the deposits or accounts in which are insured under Federal or State law or which are protected and guaranteed under State law, or "(ii) an industrial loan association or bank chartered and supervised under Federal or State law in a manner similar to a savings and loan institution. "(C) interest on— "(i) evidences of indebtedness (including bonds, debentures, notes, and certificates) issued by a domestic corporation in registered form, and "(ii) to the extent provided in reg^ulations prescribed by the Secretary, other evidences of indebtedness issued by a domestic corporation of a type offered by corporations to the public, "(D) interest on obligations of the United States, a State, or a political subdivision of a State (not excluded from gross income of the taxpayer under any other provision of law), "(E) interest attributable to participation shares in a trust established and maintained by a corporation established pursuant to Federal law, and "(F) interest paid by an insurance company under an agreement to pay interest on— "(i) prepaid premiums, "(ii) life insurance policy proceeds which are left on deposit with such company by a beneficiary, and (iii) under regulations prescribed by the Secretary, policyholder dividends left on deposit with such company. "(2) QuAUFiED INTEREST EXPENSE DEFINED.—The term 'qualified interest expense' means an amount equal to the excess of— "(A) the amount of the deduction allowed the taxpayer under section 163(a) (relating to interest) for the taxable year, over "(B) the amount of such deduction allowed with respect to interest paid or accrued on indebtedness incurred in— "(i) acquiring, constructing, reconstructing, or rehabilitating property which is primarily used by the taxpayer as a dwelling unit (as defined in section 280A(fKl)),or "(ii) the taxpayer's conduct of a trade or business."
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