Stimulate interest deductions for individuals
Article Abstract:
Taxpayers cannot deduct personal expenditures. However, there are a number of exceptions for residential, business and investment interests under Section 163(h)(2). Specific general requirements need to be met if an expenditure is to quality under the exceptions. Individuals on the cash method cannot deduct interest unless actual payment is made. They also need to prove that borrowed funds are commingled with other funds of the taxpayer and that the individual could pay the interest with non-borrowed funds. One of the exceptions to the prohibition against deducting personal interest is the deduction for interest on debut against a qualified residence. In addition, the acquisition of debt is not limited to an initial loan. Taxpayers can refine the debt if proceeds of the new loan are utilized to repay the initial debt.
Publication Name: Practical Tax Strategies
Subject: Law
ISSN: 0040-0165
Year: 1999
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Final regs. clarify rules for reducing bases due to debt discharge
Article Abstract:
Final regulations (TD 8787, 10/21/98) under Secs 108 and 1017 offer guidelines on the implementation of ordering rules for property base reductions when gross income does not include discharge of debt income. They are applicable to debt discharges undertaken after Oct 21, 1998, as well as to Sec 108(b)(5) elections regarding debt discharges after the aforementioned date. Sec 108 requires discharge of debt income to be excluded if the discharge involves a title 11 case or an insolvent taxpayer, is a qualified farm debt, or is a qualified real property business debt for non-C corporation taxpayers. In general, the final regulations reflect previously proposed regulations except in some cases.
Publication Name: Practical Tax Strategies
Subject: Law
ISSN: 0040-0165
Year: 1999
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