Ron Peterson wrote:
> There are several categories on interest in the tax code which brings
> up the question of what types of debt are best.
Tax consequences are only one of several factors you should consider
when evaluating debt, not even necessarily the most im****tant.
> Mortgage debt on a principal home, on the other hand, does allow a tax
> deduction for the interest.
Subject to a number of restrictions.
> Does the government consider borrowing against stock to purchase an
> auto to be non tax deductible?
Correct. It's only the interest on money you borrowed to *buy* the
stock that might be deductible as investment interest expense.
> If investment income is close to zero, is investment interest expense
> deductible from other taxable income like mortgage interest?
No.
There is a general concept of proceeds tracing. To survive a tax audit,
you should be able to show that loan proceeds for which you want to
deduct interest were not mingled with other funds used for
non-deductible personal expenses. This involves having separate bank
accounts, making close-in-time transactions, and so on, similar to the
rules for tracing separate property in states where marriages are
subject to community property rules.
If you do an internet search for the title "I.R.S. SETS TIGHT RULE ON
INTEREST" you should find a free 1987 New York Times article which
provides more information.
-Mark Bole
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