I’d rather not spend money on a tax advisor if I don’t have to, lol, so I’d thought I’d ask here if anyone knows. Re: Margining, leveraging, and other such borrowing to invest… We can ONLY write-off the interest expense for tax deductibility if the investment itself is reasonably expected to generate some form of income (interest, dividends, rent, capital dividends, stock dividends, etc.) correct? For example investing in the stock of a fairly illiquid company that hasn’t paid dividends and won’t pay divs any time soon can still qualify because the share at least as the capability of paying out divs whereas borrowing to invest in gold bullion won’t qualify because there’s no legal way for gold to “pay” you any income… Am I correct in the above assumptions or way off? Both Canadian and U.S. tax laws welcome.
I think in the US it has to exceed some minimum threshhold (like 2% of AGI or something) to be able to be itemized… Just something I vaguely remember hearing… There’s a couple CPA’s on the board somewhere…
You can deduct investment interest to the extent of net investment income. There is nothing having to do with “reasonable expectation” unless something has changed in the last couple of years. If you have investment income, you can deduct the investment interest as long as you itemize. There are also some rules on straddles which I don’t recall that are exceptions.