Can margin interest expense (investment interest expense) be used to offset short-term capital gain?
Margin Interest and Short term capital gain
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Technically, no, but....
As a general rule, no, although this can happen if taxpayer can get the benefit of investment interest on Schedule A.
Investment interest (Form 4952) can be deducted on Schedule A without phase-out.
For there to be any benefit, the taxpayer must itemize. Investment interest is also
limited by investment income, however if any such interest is non-deductible by virtue
of this limitation, it can be rolled forward.
Regards, Ron J. -
Let me clarify
As a general rule, no, although this can happen if taxpayer can get the benefit of investment interest on Schedule A.
Investment interest (Form 4952) can be deducted on Schedule A without phase-out.
For there to be any benefit, the taxpayer must itemize. Investment interest is also
limited by investment income, however if any such interest is non-deductible by virtue
of this limitation, it can be rolled forward.
Regards, Ron J.
Margin interest expense in 2006: $2,000.
Bank interest income and divident income in 2006: $300.
Short term capital gain in 2006: $1,000.
Can he claim $1,300 on line 13 of Schedule A in 2006 as investment interest or only $300?Comment
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$1300
No other facts being given, it looks like the deduction is limited to $1300, as any capital gain is considered "investment income."
And $1000 is rolled forward to 2007.
Regards, SnagComment
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