Section Tax 3.096 - Interest paid on money borrowed to purchase exempt government securities(1) Any amount of distributable and nondistributable interest or dividend income which is by federal law exempt from the Wisconsin income tax shall be reduced by any related expense before it is claimed as a subtraction modification on a Wisconsin fiduciary income tax return.(2) Interest expense is a "related expense" if it is incurred to purchase securities producing exempt interest or dividend income and if it is deducted in computing Wisconsin taxable income.(3) Interest expense is not a "related expense" if it is incurred to purchase securities producing exempt interest or dividend income but is not deducted in computing Wisconsin taxable income (for example, because the taxpayer elects the standard rather than to itemize deductions). Examples: | 1) U.S. bond interest exempt from Wisconsin income tax. | $600 |
Interest which was paid on funds used to acquire exempt securities and which was claimed as an itemized deduction. | 400 |
Subtraction modification. | $200 |
2) U.S. bond interest exempt from Wisconsin income tax. | $400 |
Interest paid to acquire the exempt securities which was claimed as an itemized deduction. | 600 |
Subtraction modification. | $ 0 |
3) U.S. bond interest exempt from Wisconsin income tax. | $400 |
Interest paid to acquire the exempt securities but not claimed as an itemized deduction | 600 |
Subtraction modification | $400 |
Wis. Admin. Code Department of Revenue Tax 3.096
Cr. Register, January, 1977, No. 253, eff. 2-1-77; am. (1), Register, June, 1990, No. 414, eff. 7-1-90.Amended by, correction in (Notes) made under s. 35.17, Stats., Register August 2022 No. 800, eff. 9/1/2022 This section interprets s. 71.05(6) (b) 1, Stats.