What is the de minimus exception?
The de minimus exception is an exception to the general tax rules denying a deduction for interest on debt used to purchase or carry tax-exempt obligations. Under the de minimus (also known as “insubstantial holdings”) exception, if the average amount of tax-exempt obligations is less than 2% of the average total assets of the corporation, the IRS will not infer that corporate debt can be traced to tax-exempt holdings.
