Discussion:Is this Investment Interest?
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Discussion Forum Index --> Tax Questions --> Is this Investment Interest?
Actionbsns (talk|edits) said: | 17 July 2007 |
| I searched, but the questions relate to using the money for things like business purchases. This client borrowed money from their equity based account with Merrill Lynch, consequently paid interest and the broker is telling me that it is investment interest and therefore deductible. I know my client pretty well, and the money they took out of this account was most likely used to re-decorate the house. (ie, consumer interest by purpose) But because of the nature of the account, is there any chance the broker is right? | |
| 17 July 2007 | |
| It is the use of the money not the type of account. If traced to personal use it is not investment interest. | |
| 17 July 2007 | |
| Nada, zip, zed, zero. Tracing rules apply. Interest was incurred for personal purpose, not investment purpose. No deduction. | |
| 17 July 2007 | |
| Do you think the stockbroker prepares their own tax returns? | |
Death&Taxes (talk|edits) said: | 17 July 2007 |
| I have written many, many times that when TRA 86 went into law, the common advice was to buy something like a car for cash, then take the title to the bank or brokerage, borrow on it and invest the proceeds. That was investment interest. In 21 years I've never seen the dreaded tracing rules enforced, so I think the broker has grown flabby, if he ever did know the rules. | |
Actionbsns (talk|edits) said: | 18 July 2007 |
| I love it when I'm right. | |
| July 30, 2007 | |
| I just got a call from a Merrill Lynch broker and I remembered this post. The broker wanted to know if a margin loan for a client of mine would qualify as tax deductible. Unfortunately, the answer was no. The proceeds were going to be used to purchase their residence in another country. This broker was also under the impression that all margin interest was deductible as investment interest. This person was very polite and understood once I explained the rules. | |
Death&Taxes (talk|edits) said: | 30 July 2007 |
| Reading Paul's comment made me go back and find a book I bought in 1987 about adjusting to the new law, and there was THE strategy. I do wonder if the source is 'reputable' since though the book was published by Matthew Bender, it was authored by Arthur Andersen. | |
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