2141smh@aluxe.UUCP (henning) (09/08/84)
**** **** From the keys of Steve Henning, AT&T Bell Labs, Reading, PA aluxe!2141smh The 1983 income tax laws stated: "You may NOT deduct the following: Interest paid, such as that paid on: Debts incurred or continued to purchase or carry obligations, interest from which is wholly exempt from federal income taxes Interest paid or incurred to carry accounts or obligations whose interest is excludable." But the IRS guidelines further state that: "The IRS will NOT infer a direct relationship between a debt and an investment in tax exempts in these cases: 1. The investment in tax exempts is not substantial. That is, it is not more than 2% of the adjusted basis of the investment portfolio and any assets held in an actively conducted business. 2. The debt is incurred for a personal purpose. For example, an investor take out a home mortgage instead of selling his tax exempts and using the proceeds to finance the home purchase. Interest on the mortgage is tax deductible. 3. The debt is incurred in connection with the active conduct of a business and does not exceed business needs. But, if a person reasonable could have foreseen when he purchased the tax exempts that he would have to borrow to meet ordinary and recurrent business needs, his interest interest expenses are not deductible." But, the IRS also says: "You may make deductible contributions to an IRSA of up to $2,000 of earned income. ... Income earned on funds in the account is not taxed until the funds are withdrawn. Tax-free interest compounding can " Therefore IRA's do not produce income which is "wholly exempt" or "excludable", therefore you can borrow to invest in an IRA and deduct the interest I would assume from what the IRS says.