ALEXANDRIA, Va. (8/19/11)--Loans in excess of $50,000 that are used by members to purchase musical instruments may be considered member business loans (MBL), the National Credit Union Administration said in a legal opinion. Responding to a letter from Houston Musicians FCU manager Bob McGrew, NCUA Associate General Counsel Hattie Ulan said that these types of loans provide “a means for your professional musician members to purchase a musical instrument for use in their trade as paid musicians.” She added that the musical instruments that are purchased with the loan are “tool(s) of the musician’s trade” and are “acquired for use in a business capacity. “Therefore, where a loan to a member for this purpose totals $50,000 or more when aggregated with other such loans to the member, the loan is an MBL,” Ulan wrote. While McGrew noted that the U.S. Internal Revenue Service (IRS) has previously said these loans should be considered personal loans and would not consider any interest on these loans to be a business deduction for the member, Ulan said that the NCUA “(does) not consider IRS treatment of an expense to be determinative of whether a loan qualifies for MBL treatment.” Ulan also encouraged the credit union to discuss extending its aggregate MBL limit with regional credit union authorities. For the full letter, use the resource link.