Publication 598 |
2001 Tax Year |
Computation of Debt-Financed Income
For each debt-financed property, the unrelated debt-financed income
is a percentage (not over 100%) of the total gross income derived
during a tax year from the property. This percentage is the debt/basis
percentage, and the formula for deriving unrelated debt-financed
income is:
Table
Average acquisition indebtedness and average adjusted basis are
defined later in this chapter.
Example.
X, an exempt trade association, owns an office building that is
debt-financed property. The building produced $10,000 of gross rental
income last year. The average adjusted basis of the building during
that year was $100,000, and the average acquisition indebtedness with
respect to the building was $50,000. Accordingly, the debt/basis
percentage was 50% (the ratio of $50,000 to $100,000). Therefore, the
unrelated debt-financed income with respect to the building was $5,000
(50% of $10,000).
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