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until the funds are withdrawn.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.