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Taxable and Business Income

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Taxable and Business Income

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"All interest paid or accrued within the taxable year on indebtedness, except on indebtedness incurred or continued to purchase or carry obligations (other than obligation of the United States issued after September 24, 1917, and originally subscribed for by the taxpayer) the interest from which is wholly exempt from taxes imposed by this chapter." Though the statement is apparently clear and unambiguous, its application has aroused much litigation and controversy. To a considerable extent the problems have arisen in connection with what, to the uninitiated, must seem rather unusual business relationships. Some transactions, in fact, appear to be in the form they are primarily to gain the tax advantage of the interest...

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