Unrelated Debt-financed Income

Unrelated Debt-financed Income means:
the total gross income from a debt-financed property for the tax year multiplied by a fraction whose numerator is the average acquisition indebtedness and whose denominator is the average adjusted basis. Unrelated debt-financed income is included in the unrelated business income of tax-exempt organizations. Expenses pertaining to the debt-financed property are deductible to the extent of the same fraction. This concept was developed to prevent the transfer of income- producing property to a not-for-profit organization in a transaction structured to allow the purchaser to pay for the property out of income produced by the property.