During the current year, Charlene borrows $10,000 to purchase Kansas City bonds. Charlene incurs $800 of interest on her outstanding loan. How much interest expense may Charlene deduct in the current year?
What will be an ideal response?
$0. Charlene may not deduct any interest expense because her loan was used to purchase tax-exempt securities. Section 265 specifically disallows any deduction.
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