If a 103 lease does not comply with state law, is the interest component of the lease payments still tax-deductible?
It depends on whether the 103 lease is valid under state law despite the failure to comply with the law. If the lease is void then the interest paid and retained, if any, is not tax-exempt. For the interest to be treated as an obligation of a state or subdivision thereof, the Internal Revenue Code requires that the underlying obligation be a valid and enforceable obligation of the government.
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- If a 103 lease does not comply with state law, is the interest component of the lease payments still tax-deductible?
