You will probably find that the mortgage interest deduction
is limited interest on acquisition indebtedness, which is
defined in the Treas. Regs. You will find your answer
there... As for a business expense, you generally cannot
deduct an item as a business expense unless you are holding
the underlying asset for business purposes. I suppose there
could be facts that might make this possible, but I really
doubt your house is being held as a business asset... Best
of luck.

Gary Brolis
http://www.MechanicsofMoney.com
http://www.MechanicsofMoney.com/blog.php

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jeffrey.wolff[at]gmail.com wrote:

- quote -

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.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

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 foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >