[Code of Federal Regulations]
[Title 26, Volume 3]
[Revised as of April 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.242-1]

[Page 384]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
COMPUTATION OF TAXABLE INCOME (Continued)--Table of Contents
 
Sec. 1.242-1  Deduction for partially tax-exempt interest.

    A corporation is allowed a deduction under section 242(a) in an 
amount equal to certain interest received on obligations of the United 
States, or an obligation of corporations organized under Acts of 
Congress which are instrumentalities of the United States. The interest 
for which a deduction shall be allowed is interest which is included in 
gross income and which is exempt from normal tax under the act, as 
amended and supplemented, which authorized the issuance of the 
obligations. The deduction allowed by section 242(a) is allowed only for 
the purpose of computing normal tax, and therefore, no deduction is 
allowed for such interest in the computation of any surtax imposed by 
Subtitle A of the Internal Revenue Code of 1954.

[T.D. 7100, 36 FR 5333, Mar. 20, 1971]