jasdlm Posted April 7, 2013 Report Share Posted April 7, 2013 Taxpayer borrowed on margin to purchase a primary residence. I think the (substantial) interest is not deductible, even though the investment income is sufficient, because it wasn't used to purchase a taxable investment, but I want to make sure I'm right. I'd sure like to deduct the interest. Thanks for the help. d Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted April 7, 2013 Report Share Posted April 7, 2013 She is screwed because of the way she did it. You are right. Quote Link to comment Share on other sites More sharing options...
joanmcq Posted April 7, 2013 Report Share Posted April 7, 2013 Now that's one of the dumbest client moves I've heard. Especially ones that have the financial resources to buy a primary residence on margin. Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted April 7, 2013 Report Share Posted April 7, 2013 Wow! Quote Link to comment Share on other sites More sharing options...
Guest Taxed Posted April 7, 2013 Report Share Posted April 7, 2013 Taxpayer can cut his losses going forward by getting a mortgage pronto and paying back that margin loan. What is the interest rate on that BTW? One year one of my clients put $25,000 on her Amex to close on her house. Carried that for 1 yr!! Quote Link to comment Share on other sites More sharing options...
taxxcpa Posted April 7, 2013 Report Share Posted April 7, 2013 If they have that much in marginable securities, they should sell enough of them and repay the margin loan. Quote Link to comment Share on other sites More sharing options...
jainen Posted April 7, 2013 Report Share Posted April 7, 2013 >>one of the dumbest client moves I've heard<< I will stand up for this client! We don't know the actual reasons, but there are many good ones. First, margin interest is pretty cheap compared to unsecured debt like a credit card. It is also fast and easy. Not every borrower qualifies for a good mortgage; not every property qualifies for a good mortgage. With real estate currently at the bottom of the market, opportunity cost can far exceed the margin cost. That may be hard to quantify, but buying a primary residence is always very subjective. Missing a tax deduction fits in nicely with such analysis. In my opinion, tax consequences should always be a lesser priority. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.