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Bond Holders
Get Break

Washington (JTA) — Israel
Bond holders may be relieved to
learn that their failure to declare
interest they never earned will
probably not be considered a vio-
lation of United States tax law.
The House Ways and Means
Committee has approved legisla-
tion that would exempt holders
of Israel Bonds from a provision
in the 1984 Deficit Reduction
Act requiring lenders to pay tax
on the full amount of interest
that would accrue if the loans
were made at prevailing market
rates.
The "imputed interest pro-
vision" was aimed against those
who made artificial, low-interest
loans as a legal .means of tax
evasion. Before the legidlation,
for example, wealthy parents
could extend large amounts of
money to their children in order
to exploit the latter's lower tax
rates.
If Israel Bonds are not exemp-
ted from the 1984 act, holders
would be required to pay tax on
more income than they actually
earn. A holder of a $1,000 bond,
for example, would earn $40 at
the bond's interest rate of four
percent. But he would be re-
quired to report the $100 in
interest income he could have
received if the bond had been is-
sued at the current approximate
market rate of ten percent.
The House Ways and Means
Committee last month approved
a proposal sponsored by Rep.
Charles Rangel (D-N.Y.) to
exempt Israel Bonds from the
1984 law. Similar legislation has
been introduced in the Senate
Finance Committee by Pete Wil-
son (R-Calif.)

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Soviet-Israel
Ties Conditional

Paris (JTA) — Soviet leader
Mikhail Gorbachev said last Fri-
day that the resumption of dip-
lomatic relations with Israel is
linked to "a normalization" of the
situation in the Middle East.
Speaking at a press conference
before his return to Moscow after
a four-day visit to France, Gor-
bachev refused to give any details
on the conditions of detained
Jewish and non-Jewish activists
in the USSR or be drawn into a
discussion on the condition of the
Jewish population inside the
Soviet Union.

Competition
FOr El Al

Tel Aviv (JTA) — El Al and
the Ministry of Transport are
trying to prevent implementa-
tion of .a plan by Pan American
Airlines to institute a regular
flight schedule between the U.S.
and Israel.
Panam officials said last week
that'despite the local opposition,
they will begin their thrice-
weekly flights on Nov. 1, at 'a
fare considerably lower than
that the present rate, charged by
El Al.

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Friday, October 11, 1985 47

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