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Strategies & Market Trends : Income Taxes and Record Keeping ( tax ) -- Ignore unavailable to you. Want to Upgrade?

To: J R KARY who wrote (1860)	2/8/1999 3:00:00 PM
From: Richard Forsythe	Respond to of 5810

The way I understand it (which could of course be wrong) is that you can deduct all the expense charged to you as it happens, but it can only be used to offset investment income/gains. Thus, if you have $10k of margin interest but only $5k of dividends/cap gains, you get to defer $5k to the following year. I think there is a form that calculates the deferral... R

To: J R KARY who wrote (1860)	2/8/1999 6:33:00 PM
From: Colin Cody	Read Replies (2) \| Respond to of 5810

Jim Colin can the margin interest be deducted without margin payment ? ??? you mean without depositing $$$ to pay it? There was a Revenue Ruling posted by someone two days ago which says "NO". You may not "borrow" more margin to pay the interest if you want a deduction currently. You must SELL stock, DEPOSIT cash, and leave DIVIDENDS there to cover the interest due. Can the margin interest be itemized as a annual investment expense charged against that year's investment (dividend etc.) income ? Yes, sort of, but the "offset" is an itemized deduction on Sch A. The alternative appears to be clumsy , which is full payment of the margin balance and using the margin interest (including past years ?) as a interest expense ? No need to pay off the full balance. Just deposit enough to cover interest charged + prior year interest if not yet paid. The annual margin interest calculation as a itemized interest expense seems more reasonable - is it acceptable to the IRS ? I don't follow this. The Rev Ruling pretty much covers the rule to follow. Colin