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Posted by Bill Brown on April 16, 2006, 11:45 pm
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jeffrey.wolff@gmail.com wrote:
> Besides the fact that this strategy is very risky, if I were
> to take out a second mortgage on my primary home and use the
> entire loan amount of the second mortgage to invest it in
> high yield corporate bonds, could I deduct the loan interest
> and closing fees from the capital gains generated with this
> cash? Since the sole purpose of the loan is to generate
> income, wouldn't it be considered a business expense? I
> searched the IRS website, but haven't found any relevant
> information for this particular use of a qualified second
> mortgage.
The interest would be deductible on Schedule A as investment
interest to the extent you have net investment income. For
capital gains to count as for this purpose, you would have
to elect to have those capital gains taxed as ordinary
income.
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