(iii ) Anti-avoidance rule for third party back-to-back loans. The partner's distributive share of the interest expense of the partnership that is directly allocable under § 1.861-10T is allocated according to the treatment, after application of § 1.904-4(n)(1), of the partner's distributive share of the income to which the expense is allocated. To the extent that partnership interest expense is directly allocated under § 1.861-10T, a comparable portion of the income to which such interest expense is allocated is disregarded in determining the partner's relative distributive share of gross foreign source income in each separate category and domestic source income. A partner's distributive share of partnership interest expense (other than partnership interest expense that is directly allocated to identified property under § 1.861-10T) is apportioned in accordance with the partner's relative distributive share of gross foreign source income in each separate category and of gross domestic source income from the partnership. Under § 1.904-4(n)(1)(ii), such a partner's distributive share of foreign source income of the partnership is treated as passive income (subject to the high-taxed income exception of section 904(d)(2)(B)(iii)(II)), except in the case of income from a partnership interest held in the ordinary course of the partner's active trade or business, as defined in § 1.904-4(n)(1)(ii)(B). A limited partner (whether individual or corporate), whose ownership, together with ownership by persons that bear a relationship to the partner described in section 267(b) or section 707, of the capital and profits interests of the partnership is less than 10 percent directly allocates its distributive share of partnership interest expense to its distributive share of partnership gross income. An individual using the tax book value or alternative tax book value method of apportionment shall use the partnership's inside basis in its assets, including adjustments under sections 734(b) and 743(b), if any, and adjusted to the extent required under § 1.861-10T(d)(2). Each such individual partner shall take into account his or her distributive share of the partnership gross income or pro rata share of the partnership assets in applying such rules. The individual must then apportion his or her interest expense, including the partner's distributive share of partnership interest expense, under the rules of paragraph (d) of this section. The individual shall first classify his or her distributive share of partnership interest expense as interest incurred in the active conduct of a trade or business, as passive activity interest, or as investment interest under regulations issued under sections 163 and 469. An individual partner is subject to the rules of this paragraph (e)(3) if either the individual is a general partner or the individual's direct and indirect interest (as determined under the attribution rules of section 318) in the partnership is 10 percent or more. The third tier, Expense Type, provides further details on government account series debt and the types of securities issued as part of public debt.(3 ) Individual partners who are general partners or who are limited partners with an interest in the partnership of 10 percent or more. The second tier, Expense Group, describes whether the expense is a cash or accrual basis for government account series debt, as well as additional details for public debt. The first tier, Expense Category, notes whether the interest expense is on public or government account series (GAS) debt. This data uses a three-tier hierarchy for describing interest expenses. Some columns in this dataset overlap with the Monthly Treasury Statement (MTS) dataset. In addition, other Government Account Series (GAS) security information is reflected using the cash basis of accounting. Accrued interest and discount and premium amortization are shown for marketable public issues as well as zero coupon bonds. The Interest Expense on the Public Debt Outstanding dataset provides interest information as calculated on the modified accrual basis of accounting for outstanding interest-bearing Treasury securities.
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