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Subject:  Re: turning margin interest into something usabl Date:  2/5/2000  9:32 PM
Author:  TMFTaxes Number:  27401 of 133005

<<So here's my problem. Now that I realize it, I was foolish (small 'f') to do it this way, so I'm trying to recover.

I took a margin loan against my securities and used it for something OTHER than buying more securities (nothing so foolish as a trip to Europe or anything.)>>

But what you used the money for is important...because if it was used for personal purposes, part of the interest that you're paying on the margin account would be considered non-deductible personal interest.

<<Anyway, I'd like to turn that margin loan into an "investment loan".>>

Sorry...but I don't know what this means.

<< Can I sell some of my stocks to pay the margin back, then take another margin loan to buy back my securities?>>

Yup...I think...if I understand your question correctly.

<< At that point, I've used the margin to buy securities, so the interest becomes deductible.>>


<< Are there any limitation to doing this, like I can't buy back the same security I sold for 32 days (I confess I'm not fully up to speed on wash rules, but suffice it to say that I don't have any current losers to sell.)>>

The wash sale rules only apply to shares that you sell for a loss. If you have none of those, then you'll not have any wash sale issues. You can read more about the wash sale rules (and get yourself up to speed) in the Taxes FAQ area.

The biggest drawback to this would be that you would have to recognize (and pay taxes) on the gains from the stock sales. That could be a big negative to an otherwise good plan. So make sure you run all of the numbers. It's possible that paying non-deductible personal interest might be preferable to paying capital gains taxes.

TMF Taxes

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