Coordination with interest capitalization provisions

(A) In general In applying this subsection— (i) the limitation under paragraph (1) shall apply to business interest without regard to whether the taxpayer would otherwise deduct such business interest or capitalize such business interest under an interest capitalization provision, and (ii) any reference in this subsection to a deduction for business interest shall be treated as including a reference to the capitalization of business interest.

(B) Amount allowed applied first to capitalized interest The amount allowed after taking into account the limitation described in paragraph (1)— (i) shall be applied first to the aggregate amount of business interest which would otherwise be capitalized, and (ii) the remainder (if any) shall be applied to the aggregate amount of business interest which would be deducted.

(C) Treatment of disallowed interest carried forward No portion of any business interest carried forward under paragraph (2) from any taxable year to any succeeding taxable year shall, for purposes of this title (including any interest capitalization provision which previously applied to such portion) be treated as interest to which an interest capitalization provision applies.

(D) Interest capitalization provision For purposes of this section, the term “interest capitalization provision” means any provision of this subtitle under which interest— (i) is required to be charged to capital account, or (ii) may be deducted or charged to capital account.