"Tony" <tonkoj[at]gmail.com> wrote

- quote -

Investment interest is an itemized deduction, flows to
Schedule A off of Form 4952, so they are correct in that
when combined with all other itemized deductions it does not
exceed the standard deduction amount, you get no tax benefit
from your investment interest.

- quote -

Actually they are only deductible if they are paid on each
trade. A flat fee paid or a percentage of assets paid would
flow to Schedule A also, and if not exceeding the standard
deduction, would be of no benefit.

Look at it this way, you get to deduct the margin interest
and more, a "gimmie" by the government of an additional
amount up to the standard deduction.

--
Paul Thomas, CPA
paulthomascpapc[at]bellsouth.net

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Tony" <tonkoj[at]gmail.com> wrote:

- quote -

Look at it this way: Brokers' commissions are a cost of
buying and selling securities. Thus, they are used in
calculating gain or loss on the sale of a secutity.

On the other hand, margin interest is not a cost of buying
and selling. It is a cost of holding securities in your
account. Thus, the interest is related to the dividends and
interest, not the gain or loss on transactions. So, like
other investment expenses, it is deductible on Schedule A.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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Tony wrote:

- quote -

You're a single fellow, right? And without any other
itemized deductions? In this case you get the standard
deduction of $5,000 because your other deductions, including
margin interest don't exceed that figure.

ChEAr$$$$,
Harlan Lunsford,EA n LA

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Tony wrote:

- quote -

You have to be itemizing your deductions before investment
interest saves you any taxes. If your standard deduction
($5,000 for a singe taxpayer in 2005) is more than your
total itemized deductions, then using the standard deduction
saves you more money.

The broker's commissions directly increase the cost of your
investment or reduce your proceeds on sale.

That's just the way Congress made the law.

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Tony wrote:

- quote -

It seeems that you don't itemize deductions.
You are caught in the fact that broker commissions come off
the top, i.e. they are part of the trade itself and net out
on each transaction. The margin interest flows to schedule
A, same form containing mortgage interest, state tax, etc.
For those who itemize, margin interest is taken on this form
(up to investment income), but if you don't itemize already,
the $1000 is still less than your standard deduction, which
for 2005 is $5,000.

In a similar situation is the person with $4,000 of mortgage
interest. If they don't have other deductions to get over
that $5,000, they can skip the schedule A altogether.

JOE

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Tony wrote:

- quote -

Do you itemize your deductions on Schedule A? Do they
(including the margin interest) exceed $5,000? If not, then
you use the Standard Deduction of $5,000 and get no
additional tax benefit from the margin interest. One or the
other.

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- quote -

Broker's commissions directly reduce the gain you make on a
specific trade. When you report that gain on Schedule D, you
report the net gain including the effect of the commissions.

Margin Interest is an itemized deduction, reported on
Schedule A. Other itemized deductions are things like state
income tax, property tax, mortgage interest, and charitable
contributions. When you compute your taxes you sum up all
these itemized deductions and subtract them from your
(adjusted) gross income. OR instead of subtracting these
itemized deductions you can subtract a "standard" deduction,
which happens to be $5,000 for a single person. If your
total itemized deductions are less than your standard
deduction, you come out ahead by using the standard
deduction. Sounds like that is what happened to you.

--
Don EA in Upstate NY

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"Tony" <tonkoj[at]gmail.com> writes:

- quote -

That sounds correct. You get the "standard deduction" just
for being alive. If your total actual itemized deductions
(state&local income tax, property tax, charity, mortgage
interest, allowable investment interest, etc.) is less than
the standard deduction, there's no point in taking the
actual deduction since you'll get a better tax result by
taking the standard deduction.

And, as stated, the investment interest deduction is
a Schedule A itemized deduction. The only way to take
it is to itemize. But if itemized deductions are less
than the standard deduction, itemizing makes you pay
more taxes.

So the odds are that the Block guy is correct.

- quote -

That's correct if you don't itemize.

- quote -

Then you've misunderstood what you've read.

- quote -

See above.

- quote -

(1) Brokerage commissions aren't "deductible" per se. They
are considered part of the cost of buying and selling
securities and so become part of basis, directly
affecting the computed capital gain or loss.
(2) That's how Congress wrote the law.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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"Tony" <tonkoj[at]gmail.com> wrote:

- quote -

You had a false expectation. The fact that you had
sufficient investment income means that your investment
interest is *deductible*, but it's not deductible directly
against investment income. It's an itemized deduction on
Schedule A.

- quote -

I suspect a little miscommunication here. The 2005 standard
deduction for a Single filer is $5,000. If your investment
interest plus other Schedule A items isn't at least $5,000,
there's no tax benefit to the interest.

<snip
- quote -

Because Congress is the mommy, and Congress says so.

--
Phil Marti
Clarksburg, MD

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I went to H&R Block to file my tax return.

My investment (short term) income was higher than the
interest I payed to Ameritrade broikerage for margin
interest. I expected that margin interest (used only to
finance short term stock trades) can be deducted from my
investment income.

However, H&R Block accountant (?!) told me that, since my
margin interest payment is lower than $5,000 deductible
allowed by the Government, nothing would be accomplished
(i.e. I won't pay less taxes) by deducting it.

In short, if my short term trades investment income was
$2,000 and margin interest was $1,000, according to H&R
Block person, I have to report $2,000 as investment income
and I can simply forget about $1,000 margin interest payed
to the brokerage on that income (it can't be deducted)

However, everything I read on the Web appears to contradict
this.

Now I am completely confused and seeking explanations and
help on this issue. Why are broker's comissioins deductible
but margin interest is not?

Thanks for any clarification,
Tony

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