Wis. Admin. Code § Tax 3.096 — Interest paid on money borrowed to purchase exempt government securities

Tax 3.096(1) (1) Any amount of distributable and nondistributable interest or dividend income which is by federal law exempt from the Wisconsin income tax shall be reduced by any related expense before it is claimed as a subtraction modification on a Wisconsin fiduciary income tax return.

Tax 3.096(2) (2) Interest expense is a “related expense” if it is incurred to purchase securities producing exempt interest or dividend income and if it is deducted in computing Wisconsin taxable income.

Tax 3.096(3) (3) Interest expense is not a “related expense” if it is incurred to purchase securities producing exempt interest or dividend income but is not deducted in computing Wisconsin taxable income (for example, because the taxpayer elects the standard rather than to itemize deductions).