Where is "exempt income" defined?

August 15, 2008

Date:  Sun, 27 Jul 2008
From:  Z. N.

Can you please tell me, which section of code defines "exempt income"?


Date:  Tue, 05 Aug 2008

Hello Z. N.,

I haven't found one. There are many exclusions and exemptions for different types of exempt income. For example, Section 103 provides an exclusion from gross income from state and municipal bond interest.

Section 265 provides that expenses and interest relating to tax exempt income are not tax deductible.

Treasury (IRS) Regulations Section 1.265-1(b) provides that a "class of exempt income" means any class of income wholly exempt from the taxes imposed by subtitle A of the Code. For purposes of this section, a class of income which is considered as wholly exempt from the taxes imposed by subtitle A includes any class of income which is -

  1. (i) Wholly excluded from gross income under any provision of subtitle A, or
  2. (ii) Wholly exempt from the taxes imposed by subtitle A under the provisions of any other law.

Good luck!
Mike Gray

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