Interest expense for UBTI purposes.
| Jurisdiction | United States |
| Date | 01 October 1997 |
| Author | Sunshine, Barry |
Increasing numbers of pension plan trustees are allocating pension plan investments into nontraditional investments. These investments include investment partnerships or "hedge funds" that acquire securities, some with the use of partnership borrowings.
Under Sec. 514, a tax-exempt organization is taxed on its unrelated business taxable income (UBTI), which includes debt-financed income. Recently issued Letter Ruling, (TAM) 9717004 provides guidance in calculating the amount of deductible interest from debt-financed income. The TAM concluded that the debt/basis percentage d for other deductions must also be applied to the interest deduction, thus requiring an exempt organization to lose a percentage of its interest expense that it may not otherwise be...
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