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Abstract: 

Some advisors are inherently nervous about unexpected problems that may arise when a foundation borrows money. The unrelated business income tax is one obvious problem area. After all, if a foundation borrows money for a charitable purpose and uses other funds already on hand to purchase an income-producing investment, who is to say the IRS won’t view it differently, and contend that the borrowed money was borrowed so the investment could be purchased? If the foundation holds a partnership interest in a partnership that also includes disqualified persons as partners, might the partnership’s borrowings be viewed as raising the same problem plus a possible self-dealing issue?

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