In the case of business interest (pub 535), I agree with you. A replacement business loan generates business interest. In the case of home mortgage interest, I also agree; a refi that secures the same home is treated as a substitute for the acquisition (or HEL) debt that is extinguished in the payoff. In the case of investment interest, though, I don't see any authority for the proposition that a borrowing that is used to extinguish a liability that generates investment expense substitutes for that liability and is treated as though it was incurred to make the investment. Extinguishing a debt is not making an investment, so borrowing to extinguish a debt should not give rise to investment expense. I could be wrong, and the odds are greatly in favor of your being right. But I've looked at Pub 550, and I still don't see it.
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