Interest Deductions. 4, 17 IRS...................................................................... 17
Interest Deductions. Investors should seek their own independent advice as to their own individual ability to deduct any interest expenses and borrowing expenses related to borrowings to fund an investment in a Unit. As a general rule, interest on money borrowed for the purpose of deriving assessable income is deductible as the liability accrues. However, this general rule is subject to various qualifications. Relevantly, if the assessable income (other than capital gains) from an investment is exceeded by the related deductible expenses (e.g. interest expenses), the Commissioner may focus on the Investor’s purpose for undertaking the investment. If the deficit can only reasonably be explained by reference to factors such as the reduction of tax or the making of a capital gain, the Commissioner may treat the deficit as not being deductible. As a practical matter, the relevant question is whether, at the time the investment was entered into, it was reasonably likely the income (other than capital gains) from the investment would exceed the related deductible expenses. The Commissioner has been known to take the view that any income arising from the delivery assets after maturity is to be ignored for these purposes, on the basis that the investment in a deferred purchase agreement is distinct from the subsequent investment in the delivery assets. The Commissioner has also been known to apply a “hindsight” approach, whereby interest deductions are limited to the amount of income in fact derived during the same income year (regardless of the Investor’s expectations). We recommend that Investors discuss the availability of deductions with their tax advisers prior to claiming any income tax deduction. Please also refer to the comments below in relation to the general anti-avoidance rules Interest that is non-deductible will be included in the cost base of the Units, but will not be included in the reduced cost base of the Units, as described under the heading “Delivery of Delivery Assets” above, and so will not give rise to any capital loss. Division 247 of Part 3-10 of the 1997 Act provides specific rules for the tax treatment of interest on money borrowed as part of a “capital protected product” which relates to the acquisition of a beneficial interest in shares, units or stapled securities. The rules arguably do not apply to an investment in deferred purchase agreements, particularly if the Commissioner’s view described above applies, however, this is untested. Investors that bor...
Interest Deductions. To the extent, if at all, the Company is entitled to an interest deduction with respect to payments to the Owners pursuant to Section 2.1 or Section 2.2 of the Purchase Agreement, such deduction shall be specially allocated to the Owners (prorata among them in proportion to their entitlement to any such interest).
Interest Deductions. To the extent, if at all, the Partnership is entitled to an interest deduction with respect to payments to the Owners pursuant to Section 2.1 or Section 2.2 of the Purchase Agreement, such deduction shall be specially allocated to the Owners (prorata among them in proportion to their entitlement to any such interest).
