Negative Interest Rate...

tb

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Jun 29, 2016, 4:06:48 PM6/29/16

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Please note that I am not a tax professional.

I have an offshore bank account on which the depository bank will soon
start charging me a so-called negative interest rate, i.e. I will have
to pay interest to the bank on my money deposited in it!

The bank account is duly disclosed to the IRS and FinCEN and I've
always paid taxes on interest accrued on it.

I don't suppose that now that I must pay negative interest there is a
way to deduct it from my tax liability, right? (The bank account is
for personal use only...)

Kind of a silly question, but one never knows...
--
tb

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ira smilovitz

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Jun 29, 2016, 4:22:03 PM6/29/16

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On Wednesday, June 29, 2016 at 4:06:48 PM UTC-4, tb wrote:
> Please note that I am not a tax professional.
>
> I have an offshore bank account on which the depository bank will soon
> start charging me a so-called negative interest rate, i.e. I will have
> to pay interest to the bank on my money deposited in it!
>
> The bank account is duly disclosed to the IRS and FinCEN and I've
> always paid taxes on interest accrued on it.
>
> I don't suppose that now that I must pay negative interest there is a
> way to deduct it from my tax liability, right? (The bank account is
> for personal use only...)
>
> Kind of a silly question, but one never knows...
> --
> tb

I haven't done any research on this, but I would suspect you might be able to deduct this as investment interest subject to the usual rules. See the instructions for Form 4952.

Ira Smilovitz

Alan

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Jun 29, 2016, 5:38:00 PM6/29/16

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On 6/29/16 1:21 PM, ira smilovitz wrote:
> On Wednesday, June 29, 2016 at 4:06:48 PM UTC-4, tb wrote:
>> Please note that I am not a tax professional.
>>
>> I have an offshore bank account on which the depository bank will soon
>> start charging me a so-called negative interest rate, i.e. I will have
>> to pay interest to the bank on my money deposited in it!
>>
>> The bank account is duly disclosed to the IRS and FinCEN and I've
>> always paid taxes on interest accrued on it.
>>
>> I don't suppose that now that I must pay negative interest there is a
>> way to deduct it from my tax liability, right? (The bank account is
>> for personal use only...)
>>
>> Kind of a silly question, but one never knows...
>> --
>> tb
>
> I haven't done any research on this, but I would suspect you might be able to deduct this as investment interest subject to the usual rules. See the instructions for Form 4952.
>
> Ira Smilovitz
>

Investment interest expense presupposes a loan. I would treat it as a
cost of doing banking with that entity. I would use Schedule A Line 23,
Misc. Itemized Deduction. A cost to manage, conserve, or maintain
property held for producing such income.

The above assumes that the funds are not related to any business.

ira smilovitz

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Jun 29, 2016, 6:28:23 PM6/29/16

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On Wednesday, June 29, 2016 at 5:38:00 PM UTC-4, Alan wrote:
> On 6/29/16 1:21 PM, ira smilovitz wrote:
> > On Wednesday, June 29, 2016 at 4:06:48 PM UTC-4, tb wrote:
> >> Please note that I am not a tax professional.
> >>
> >> I have an offshore bank account on which the depository bank will soon
> >> start charging me a so-called negative interest rate, i.e. I will have
> >> to pay interest to the bank on my money deposited in it!
> >>
> >> The bank account is duly disclosed to the IRS and FinCEN and I've
> >> always paid taxes on interest accrued on it.
> >>
> >> I don't suppose that now that I must pay negative interest there is a
> >> way to deduct it from my tax liability, right? (The bank account is
> >> for personal use only...)
> >>
> >> Kind of a silly question, but one never knows...
> >> --
> >> tb
> >
> > I haven't done any research on this, but I would suspect you might be able to deduct this as investment interest subject to the usual rules. See the instructions for Form 4952.
> >
> > Ira Smilovitz
> >
> Investment interest expense presupposes a loan. I would treat it as a
> cost of doing banking with that entity. I would use Schedule A Line 23,
> Misc. Itemized Deduction. A cost to manage, conserve, or maintain
> property held for producing such income.
>
> The above assumes that the funds are not related to any business.
>
> --

Alan's response (which makes more sense than mine) prompted me to actually do some research. The answer appears to be that there is no answer. In 2015, IRPAC (the IRS Information Reporting Program Advisory Committee) raised this issue requesting that the IRS issue guidance. See https://www.irs.gov/PUP/taxpros/2015IRPACInternationalReportingWithholdingSubgroup.pdf page 71 (page 7 of the pdf file).

Ira Smilovitz