Definition: tax-exempt obligation from 26 USC § 265(b)(4) | LII (2024)

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Definition: tax-exempt obligation from 26 USC § 265(b)(4) | LII? ›

The term “tax-exempt obligation” means any obligation the interest on which is wholly exempt from taxes imposed by this subtitle. Such term includes shares of stock of a regulated investment company which during the taxable year of the holder thereof distributes exempt-interest dividends.

Tax Exempt Obligations means any bond, note or other obligation issued by any person, the interest on which is excludable from gross income for federal income tax purposes. Based on 122 documents. 122.

Section 265(a)(2) disallows a deduction for interest expense related to tax-exempt obligations. Section 265(b)(3) provides an exception to the rule that generally disallows the deduction for interest expense. Tax-exempt obligations must meet the requirements of a qualified tax- exempt bond for the exception to apply.

Examples of Tax-Exempt Interest

This may imply that you are not required to pay specific taxes like federal income taxes or state income taxes. For instance, tax-exempt interest is frequently generated by municipal bonds. These are issued by governments and they can be at the local, state, or federal levels.

What does tax-exempt mean? Being tax-exempt means that some or all of a person's or business's income is free from federal, state or local tax. Tax-exempt organizations are typically charities or religious organizations recognized by the IRS. Internal Revenue Service. Exempt Organization Types.

(i)For purposes of subparagraph (A), the term “qualified tax-exempt obligation” means a tax-exempt obligation— (I)which is issued after, by a qualified small issuer, (II)which is not a private activity bond (as defined in), and (III)which is designated by the issuer for purposes of this paragraph. (

Your taxable income minus your tax deductions equals your gross tax liability. Gross tax liability minus any tax credits you're eligible for equals your total income tax liability. But before you can start crunching numbers, you need to understand your entity type. That will affect how you calculate your taxes.

265. Notwithstanding that a reference has been made to the High court or the Supreme Court or an appeal has been preferred to the Supreme Court, tax shall be payable in accordance with the assessment made in the case.

(B) Tax-exempt obligation. The term "tax-exempt obligation" means any obligation the interest on which is wholly exempt from taxes imposed by this subtitle. Such term includes shares of stock of a regulated investment company which during the taxable year of the holder thereof distributes exempt-interest dividends.

Whoever, fraudulently uses any false weight or false measure of length or capacity, or fraudulently uses any weight or any measure of length or capacity as a different weight or measure from what it is, shall be punished with imprisonment of either description for a term which may extend to one year, or with fine, or ...

What is tax-exempt income examples? ›

Exempt income is a type of income that isn't subject to taxation. This includes certain types of investment income, such as interest from municipal bonds. Also included are certain government benefits, such as Social Security retirement benefits.

All interest income is taxable unless specifically excluded. tax-exempt interest income — interest income that is not subject to income tax. Tax-exempt interest income is earned from bonds issued by states, cities, or counties and the District of Columbia.

However, some interest you receive may be tax-exempt. You should receive Copy B of Form 1099-INT or Form 1099-OID reporting payments of interest and/or tax-exempt interest of $10 or more. You may receive these forms as part of a composite statement from a broker.

To claim exempt, write EXEMPT under line 4c. You may claim EXEMPT from withholding if: o Last year you had a right to a full refund of All federal tax income and o This year you expect a full refund of ALL federal income tax. NOTE: if you claim EXEMPT you must complete a new W-4 annually in February.

A tax exemption reduces or eliminates a portion of your income from taxation. Federal, state, and local governments create tax exemptions to benefit people, businesses, and other entities in special situations. Those who are entitled save on taxes by reducing their top-line income.

Tax deductions lower your taxable income based on specific investments or expenses, whereas tax exemptions directly exclude certain components of your income from being taxed. Understanding these options effectively can lead to substantial savings, making a noticeable difference in your annual tax outgo.

If someone or something is exempt from a particular rule, duty, or obligation, they do not have to follow it or do it.

When you file exempt with your employer for federal tax withholding, you do not make any tax payments during the year. Without paying tax, you do not qualify for a tax refund unless you qualify to claim a refundable tax credit, like the Earned Income Tax Credit.

In general, sales tax exemptions are statutory exceptions eliminating the need for the retailer to collect sales tax on a particular transaction or on all transactions with a customer. The most common exemption is “sale for resale,” which allows businesses to purchase products free of tax.