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To: Gerald Walls who wrote (87450)	8/30/1999 7:37:00 PM
From: Nevin S.	Respond to of 186894

Yes, in practice I believe that is what you'd do. I haven't had to go through this for one reason or another but I read this on the form every year. By applying margin interest deduction first to LTCG you would reduce the amount of your gains eligible for the more favorable cap gains tax treatment. STCG would be treated as ordinary income so there is no real distinction between STCG and "investment income", other than for purposes of offsetting any capital losses. For example, you can only deduct capital losses from cap gains (except for the $3,000 annual deduction from ordinary income). Personally, I'd prefer to have nothing but LTCG's, no losses and no margin interest, but, I have employed some leverage in my portfolio and I wouldn't be human if I didn't have losses as well. So, once again, I'm mired in our illustrious tax code trying not to get bitten by the alligators that lurk below the surface. Tomorrow's lesson - The Alternative Minimum Tax; How to Avoid an Amputation (paying an arm and a leg).