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TITLE 26-INTERNAL REVENUE CODE DEDUCTIBILITY OF AccRUED VACATION PAY Section 97 of Pub. L. 85-866, as amended by Pub. L. 86-496, §2, June 8, 1960, 74 Stat. 164; Pub. L. 88-153, Oct. 17, 1963, 77 Stat. 272; Pub. L. 88-554, 51, Aug. 31, 1964, 78 Stat. 761; Pub. L. 89-692, Oct. 15, 1966, 80 Stat. 1025; Pub. L. 91-172, title IX, § 903, Dec. 30, 1969, 83 Stat. 711; Pub. L. 92-580, §3, Oct. 27, 1972, 86 Stat. 1276, provided that deductions for accrued vacation pay under this section would not be denied for any taxable year ending before Jan. 1, 1973, so long as the employee at the time of accrual of pay has performed the necessary qualifying service under an appropriate plan. INVESTIGATION OF, AND REPORTS ON, TREATMENT or ENTERTAINMENT AND CERTAIN OTHER ExPENsEs Pub. L. 86-564, title III, § 301, June 30, 1960, 74 Stat. 291, authorized the Joint Committee on Internal Rev- enue Taxation to investigate and report on the use of entertainment and certain other expense deductions to the 87th Congress and authorized the Secretary of the Treasury to report to the 87th Congress on the en- forcement program of the Internal Revenue Service relating to such deductions. FILING OF CLAIMS FOR REFUNDS OF OVERPAYMENTS Extension of time for filing of claims for refunds or credit of overpayments of income tax resulting from application of this section, see section 96 of Pub. L. 85- 866, set out as a note under section 6511 of this title. CROSS REFERENCES Adjusted gross income as gross income minus, among others, trade and business deductions, see section 62 of this title. Capital expenditures not deductible, see section 263 of this title. Charitable contributions and gifts deductible, see section 170 of this title. Corporate organizational expenses as deferred ex- penses, see section 248 of this title. Employee stock options, disallowance of deduction under this section, see section 421 of this title. Employer contributions to employees' trust or annu- ity plan negotiated during government operation as deductible under this section, see section 404 of this title. Nontrade or nonbusiness expenses deductible, see section 212 of this title. Personal, living and family expenses not deductible, see section 262 of this title. Taxable year deductions to be taken, see section 461 of this title. Trade or business defined, see section 7701 of this title. SECTION REFERR-ED TO IN OTHER SECTIONS This section is referred to in sections 46, 57, 83, 114, 163, 183, 263, 267, 274, 404, 421, 463, 542, 543, 545, 556, 691, 707, 832, 952, 964, 995, 1054, 1253, 1402 of this title; title 2 section 31c; title 15 section 78kkk; title 42 section 403. § 163. Interest (a) General rule There shall be allowed as a deduction all in- terest paid or accrued within the taxable year on indebtedness. (b) Installment purchases where interest charge is not separately stated (1) General rule If personal property or educational services are purchased under a contract- (A) which provides that payment of part or all of the purchase price is to be made in installments, and (B) in which carrying charges are sepa- rately stated but the interest charge cannot be ascertained, then the payments made during the taxable year under the contract shall be treated for purposes of this section as if they included in- terest equal to 6 percent of the average unpaid balance under the contract during the taxable year. For purposes of the preceding sentence, the average unpaid balance is the sum of the unpaid balance outstanding on the first day of each month beginning during the taxable year, divided by 12. For purposes of this paragraph, the term "educational ser- vices" means any service (including lodging) which is purchased from an educational orga- nization described in section 170(b)(1)(A)(ii) and which is provided for a student of such organization. (2) Limitation In the case of any contract to which para- graph (1) applies, the amount treated as in- terest for any taxable year shall not exceed the aggregate carrying charges which are properly attributable to such taxable year. (c) Redeemable ground rents For purposes of this subtitle, any annual or periodic rental under a redeemable ground rent (excluding amounts in redemption thereof) shall be treated as interest on an indebtedness secured by a mortgage. (d) Limitation on interest on investment indebtedness (1) In general In the case of a taxpayer other than a cor- poration, the amount of investment interest (as defined in paragraph (3)(D)) otherwise al- lowable as a deduction under this chapter shall be limited, in the following order, to- (A) $10,000 ($5,000, in the case of a sepa- rate return by a married individual), plus (B) the amount of the net investment income (as defined in paragraph (3)(A)), plus the amount (if any) by which the de- ductions allowable under this section (deter- mined without regard to this subsection) and sections 162, 164(a) (1) or (2), or 212 at- tributable to property of the taxpayer sub- ject to a net lease exceeds the rental income produced by such property for the taxable year. In the case of a trust, the $10,000 amount specified in subparagraph (A) shall be zero. (2) Carryover of disallowed investment interest The amount of disallowed investment inter- est for any taxable year shall be treated as in- vestment interest paid or accrued in the suc- ceeding taxable year. (3) Definitions For purposes of this subsection- (A) Net investment income The term "net investment income" means the excess of investment income over in- vestment expenses. If the taxpayer has in- vestment interest for the taxable year to which this subsection (as in effect before the Tax Reform Act of 1976) applies, the amount of the net investment income taken into account under this subsection shall be § 163 Page 142