Interest expense

[natiro]

Client took a mortgage out on rental property and used the proceeds as additional funds to invest in an LLC which is constructing a condo complex. The mortgage was taken in 2006 and interest expense was incurred. The condo was in construction in 2006 and all costs in the LLC are being capitalized. All units in the complex will sell in 2007 and the profit will be reported to the taxpayer on a K-1.

Is the interest deductible in 2006 on the taxpayer's return? If so, where?
Where on his return will the interest be deducted in 2007?

Many thanks.

[erchess]

We had a similar thread just a few weeks ago.

If the client had used the funds to invest in say gold bullion or stocks the interest would be investment interest. I would think that investing in an LLC would be no different as long as his goal in investing in the LLC is to make taxable income of some sort.