When a taxpayer borrows money and invests the loan proceeds in municipal bonds, the interest paid by the taxpayer on the debt will not be deductible.

Name: When a taxpayer borrows money and invests the loan proceeds in municipal bonds, the interest paid by the taxpayer on the debt will not be deductible.
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Question

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This statement is true. According to the tax law, interest on debt incurred to purchase tax-exempt securities, such as municipal bonds, is not deductible for income tax purposes.

When a Taxpayer Borrows Money and Invests the Loan Proceeds