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Strategies & Market Trends : Income Taxes and Record Keeping ( tax )
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To: Nasty P who wrote (159)10/30/1997 10:34:00 AM
From: Colin Cody  Read Replies (1) of 5810
 
Nasty, Please provide a citation for your advice that merely investing in stocks via an S-Corp will turn what would have been "Investment Interest Expense" or as you indicated "Credit Card Interest" would be -> "deductible no matter how you use it".
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I have yet to hear that the Debt/Interest TRACING RULES have been suspended for S-Corps.
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Before you reply, please look at form 1120S, Schedule K, lines: 9, 11a and most importantly, line 19.
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You might also want to comment on the prohibition of S-Corps from deriving more than 25% of their income from "passive activities" for three consecutive years. While not necessarily an issue here if set up correctly from day 1, I am afraid that without posting a warning of it - the Corporation may inadvertently terminate its S-Corp election.
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BUT, then an S-Corp election would NOT convert personal credit card interest into deductible interest anyway! ...nor would it convert excess investment interest into currently deductible ordinary interest. In short an S-Corp would do NOTHING to the deductibility of interest whatsoever, FEDERALLY. An S-Corp could have STATE implications, either good, or bad, depending on the State involved.
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Colin
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