Section 24344(a) - Interest Deduction in General(1) Except as limited by Section 24344(b) and as otherwise provided in Sections 24424 to 24430, inclusive, interest paid or accrued within the income year on indebtedness shall be allowed as a deduction in computing net income.(2) Section 24344(b) provides that if the income of the taxpayer is determined by the allocation formula contained in Section 25101, the interest deductible shall be an amount equal to interest income subject to allocation by formula, plus the amount, if any, by which the balance of interest expense exceeds interest and dividend income (except dividends deductible under the provisions of Section 24402) not subject to allocation by formula. Interest expense not included in the preceding sentence shall be directly offset against interest and dividend income (except dividends deductible under the provisions of Section 24402) not subject to allocation by formula.(3) Interest calculated for costkeeping or other purposes on account of capital or surplus invested in the business which does not represent a charge arising under an interest-bearing obligation, is not an allowable deduction from gross income. Interest paid by a corporation on scrip dividends is an allowable deduction. So-called interest on preferred stock, which is in reality a dividend thereon, cannot be deducted in computing net income. In the case of banks and loan or trust companies, interest paid within the year on deposits, such as interest paid on moneys received for investment and secured by interest-bearing certificates of indebtedness issued by such bank or loan or trust company, may be deducted from gross income.Cal. Code Regs. Tit. 18, § 24344(a)
1. New section filed 5-5-72; effective thirtieth day thereafter (Register 72, No. 19).[FN*]
Compare Section 26 CFR 1.163-1.1. New section filed 5-5-72; effective thirtieth day thereafter (Register 72, No. 19).