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Subject:  Re: Dividend tax and margin accounts Date:  6/10/2003  10:02 PM
Author:  ValueMonger Number:  65776 of 121598

"Any comments and anything else I'm overlooking?"

Perhaps this. To deduct margin interest, you must have investment income equal or greater than the margin interest.

Under the previous rules (and current, I am sure!), to count long-term capital gains as investment income to qualify for taking the margin deduction, you had to count the qualifying long-term capital gains as regular income. For example if you had $2,000 in long-term capital gains as your only investment income and $1,000 margin interest, you would have to count $1,000 of your long-term capital gains as regular income.

I don't know if that would be the rule for the new dividend rates, but I would expect that it would. Such details probably won't be the actual tax legistlation, but in the agency's (IRS) implementation, i.e. the appropriate IRS publication. Should the IRS miss this for this year's publication, then I expect that they will get it next year.

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