Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
When is the investment interest considered as has been paid in the margin account? I will refer to my previous example:

[[ Example:
I have 5000 cash in the margin account. I buy security XYZ for 4000. In 10 days the securuty
generated $50 dividend. Then in 2 months I buy security ABC for 2550 dollars. My balance goes
to (1500) negative. In 1 month XYZ pays another $50. Then ABC pays 40 dollars dividend.
Assuming that by the end of tax year there are no more dividends and margin interest was $120
dollars, how much of this is investment interest I can deduct?]]

The total dividends are 140, interest is 120, but the margin loan has not been paid off at the end of tax year. My major points are:

can I count the first $50 dividend as "interest paid", even though there was no loan at the time of that payment;
if at the time of the didvdend payment interest accrued was less than the value of the payment, do I have to allocate parts of it toward principal.
Print the post  

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.