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<< For the first time I am about to buy stocks on margin.>>

I'm sure that you realize that this could be a strategy filled with additional risk. I also assume that you have taken the time to review your own personal situation to determine that you are willing to accept this additional risk.

<< I am assuming that the margin interest charged to my account is fully tax deductible. This deduction will be taken against earned interest income, cash dividends and the sale of stock. >>

It WILL be deductible, assuming...

1. You used the margin funds to buy additional shares of stock; and
2. You are able to itemize your deductions; and
3. You have suficient interest, dividends, gains, and other investment income to cover your other investment expenses AND the margin interest that will be charged.

The margin interst that you'll pay is treated as "investment interest expense". The investment interest expense rules are different and apart from other interest expense rules. In fact, it even has its own IRS Form (4952). You might want to grab a copy of Form 4952 and the instructions in order get a better flavor for the investment interest rules. Additionally, I have a post in the Taxes Frequently Asked Questions area regarding investment/margin interest. You can read it by going to the Fools School from the main home page, and following the roadmaps from there.

For MINIMUM required reading, check out IRS Publication 550. Pub 550 will lay out many of the tax issues that, as an investor, you will want to have at least a basic knowledge of.
<<As for the risk of buying stocks on margin I have reviewed the pros and cons of the subject. the most obvious down side if the price of the stock does not appreciate more than the intrest you are charged.>>

Not in my opinion. The most obvious downside is that the stock that you own on margin tanks, and you get a margin call. Or, the stock(s) that you owned to secure your margin loan tank, and you get a margin call. You may be forced to sell off parts of your portfolio at a loss, just to cover your margin requirements with your broker. Anything less that this is simply a minor irritation.

Happy Investing...
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