Stacy assigned her universal life insurance policy with a face value of 40,000 as collateral for a loan. The loan of 20,000 was used to purchase computer equipment for the secretarial agency she operates. She knows that she can deduct the interest she is paying on the bank loan, but wonders if she can deduct the cost of the life insurance premium. Which of the following statements is FALSE?
1) Stacy can deduct part of the cost of the premium because the bank required collateral assignment of the policy.
2) Stacy can deduct part of the cost of the premium because the policy was used to secure a loan for which the interest payments qualify as tax deductible.
3) Stacy can deduct the entire amount of the premium.
4) Stacy can deduct part of the cost of the premium because the lender is considered a 'restricted' financial institution.