Where Do I deduct Margin Interest
Roman K
Thank you.
John H. Fisher
<rom...@aol.com> writes:
>As an investor, what kind of form can I use to deduct margin interest.
If you are a cash method taxpayer, you can deduct interest on margin accounts
to buy taxable securities as investment interest in the year you paid it. You
are considered to have paid interest on these accounts only when you actually
pay the broker or when payment becomes available to the broker through your
account. Payment may become available to the broker through your account when
the broker collects dividends or interest for your account, or sells securities
held for you or received from you. You cannot deduct any interest on money
borrowed for personal reasons.
Investment Interest is deductible on Schedule A (Form 1040) "Itemized
Deductions".
"Jack" - John H. Fisher - TaxSe...@aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html
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Estabaco
>borrowed for personal reasons.
If I wanted to borrow money for personal reasons and still deduct the margin
interest, is there anything to prevent me from selling securities to raise the
cash, requesting a check from my broker for the cash thus generated, and then a
little later repurchasing the same or similar securities on margin?
D. Stussy
>As an investor, what kind of form can I use to deduct margin interest.
Form 4952, which carries to Schedule A.
D. Stussy
You cannot use the borrowed money for personal reasons and still deduct it as
margin interest (because it WON'T BE margin interest at that point).
The borrowed funds must be used invested for the interest thereon to qualify as
"investment interest expense."
Paul A. Thomas
> >You cannot deduct any interest on money
> >borrowed for personal reasons.
>
> If I wanted to borrow money for personal reasons
> and still deduct the margin interest,
Yeah, it's called the tracing rules. The interest carries the same
treatment as what the funds are used for. so, if you borrow money and make
an investment in a short period of time, it's investment interest. If you
borrow money and buy a car in a short period of time, it's called personal
interest.
> is there anything to prevent me from selling
> securities to raise the cash,
You have to report the gain or loss on this transaction
> requesting a check from my broker for
> the cash thus generated,
You can always ask for the cash, and you have the right to use your cash as
you see fit.
> and then a little later repurchasing the
> same or similar securities on margin?
This transaction, of borrowing to make an investment, would qualify the
amount borrowed as investment (margin) interest.
BEWARE::: of the wash sale rules if you sell securities at a loss and
repurchase identical stock within 30 days of the sale.
--
Paul A. Thomas, CPA
Athens, Georgia
tax...@negia.net
http://www.pat-cpa.com