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FROM THE OFFICE OF PUBLIC AFFAIRS
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JS-1515
Today, the Treasury Department and the IRS released guidance regarding the disallowance of deductions for interest paid on funds borrowed to purchase or carry tax-exempt obligations.
The guidance issued today addresses questions that have arisen regarding interest deductions by a borrower that lends or contributes money to a related entity that is a dealer in tax-exempt obligations. The guidance also clarifies the interaction between the adjustments required under the interest disallowance rules and certain adjustments required under the consolidated return regulations. In addition, the Treasury Department and the IRS requested comments regarding the application of the interest deduction disallowance rules in other situations in which a party related to the borrower invests in tax-exempt obligations or an intermediary comes between the borrower and a dealer in tax-exempt obligations.
The guidance issued today answers several significant questions, said Acting Assistant Secretary for Tax Policy Gregory Jenner. The comments requested will help the IRS and the Treasury Department to provide additional guidance on related issues.
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