Question on interest - taxpayer has an asset that is used in a business and the FMV of the asset is less than the loan (no refi's, just large drop in value). Taxpayer refi's another asset (not part of business) and takes out equity to pay down the loan on business asset so that he is able to sell the asset because the business is just not making it and wants to close business. Would the portion of the refi'd loan that applied to the asset sold and business closed down still be deductible on Schedule C which would now be the only deduction on the Schedule C for several years?
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I would say the pay down of the business loan with personal funds has no effect on gain or loss on sale and no part of the personal loan is business. The PL proceeds are not being used to acquire the asset and have no business use that I can see. Without the pay down, TP would have to come up with funds to sell. TP is just supplying these funds from his personal assets.
DonB
Colorado
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