Debt-financed Property

Debt-financed Property means:
property held for the production of income, such as rental real estate, the purchase of which was financed by acquisition indebtedness such as a mortgage. The following are specifically exempted from the definition of debt-financed property: 1. property that is used only in the performance of the organization's exempt function, 2. property that is already subject to income tax as an unrelated trade or business, 3. property used for research activities that is excluded from the unrelated business income tax, and.

4. property used in a business in which (a) substantially all of the work is performed without compensation, (b) a Section 501(c)(3) organization is engaged in the activity primarily for the convenience of members, students, and other persons, or (c) the only activity is the sale of merchandise received as contributions.

See also unrelated debt-financed income. Former IRC (check if this IRC provision is current here) §514(b).

See the entries Income Tax and State Income Tax in the American Encyclopedia of Law.