Nev. Admin. Code § 361.34 — 361.34

NAC 361.034    Calculation of interest payments on art indebtedness. ( NRS 360.090 , 361.068 ,
361.186 )
1.  For a work of fine art that was acquired
with a portion of the proceeds of a secured or unsecured indebtedness, the
amount of the interest on the total indebtedness that the taxpayer may claim as
interest payments made on the art indebtedness pursuant to subparagraph (1) of
paragraph (a) of subsection 1 of NAC 361.032
must be calculated for the fiscal year for which the taxpayer is claiming an
exemption for the work of fine art by applying the applicable rate or rates of
interest to the amount of the art indebtedness. The interest payments must be
recalculated each time that:
(a) A payment is made towards the principal of the
total indebtedness;
(b) A draw is made against the principal of the
total indebtedness; or
(c) The principal of the total indebtedness is increased
or decreased in any other manner.
2.  For the purposes of the calculations
required by subsection 1:
(a) If the principal of the total indebtedness is
reduced by a principal payment or in some other manner, the principal of the
art indebtedness must be reduced as follows:
Total amount of the art
indebtedness before payment or other reduction
X
Amount of principal payment made
or other reduction of the principal of the total amount of the indebtedness
=
Reduction in the principal on the
art indebtedness
Total amount of the principal of
the indebtedness before payment or other reduction
(b) The amount of the interest payments for the art
indebtedness must be determined as follows, after reducing the total amount of
the art indebtedness by any reduction in principal calculated pursuant to
paragraph (a), reducing the total amount of the principal of the indebtedness
by the principal payment or other reduction and increasing the total amount of
the principal of the indebtedness by the amount of any increase in the total
amount of the principal of the indebtedness:
Total amount of the art indebtedness
X
Interest accrued on the total
amount of the indebtedness
=
Amount of interest accrued on the
art indebtedness
Total amount of the principal of
the indebtedness
3.  If a taxpayer, or a subsidiary or
affiliated entity of the taxpayer, incurs interest expenses on indebtedness, a
portion of the proceeds of which were used to acquire a work of fine art, the
burden for appropriately allocating the principal payments and interest
expenses for the work of fine art between the taxpayer and the subsidiary or
affiliated entity of the taxpayer and between the work of fine art and the
other items acquired with the proceeds of the indebtedness is on the taxpayer
who is claiming an exemption for the work of fine art pursuant to paragraph (j)
of subsection 1 of NRS 361.068 .
4.  If, for the purposes of claiming an
exemption pursuant to paragraph (j) of subsection 1 of NRS 361.068 , a taxpayer acquires a
work of fine art using the proceeds of an indebtedness, the taxpayer must incur
the indebtedness for the work of fine art within 120 days after the acquisition
of the work of fine art unless the Department agrees to an extension of time.
5.  To qualify or remain eligible for an
exemption pursuant to paragraph (j) of subsection 1 of NRS 361.068 , a taxpayer who wishes
to refinance the outstanding amount of the indebtedness incurred to purchase
the work of fine art must be able to trace the new debt directly to the
repayment of the prior debt.
6.  As used in this section, “art
indebtedness” means the amount of the principal of the total indebtedness
attributable to the acquisition of the work of fine art.
(Added to NAC by Tax Comm’n by R047-01, eff. 12-17-2002)