Sim
Administrator
Hi in this thread Lily House talked about buying shares with an equity loan.
... now is this really the case ? If you buy the shares with an equity loan, we know the interest on the loan is deductible.
But if you sell some of the shares (as you do if you were trading for example) - the purpose of the loan hasn't changed (fully) - the loan interest is still deductible right ?
But if you sell your entire portfolio of shares does this change the nature of the loan ? Surely you can sell all of the original share portfolio and buy more shares - I can't see a problem with that. But what about selling the shares without re-investing them. Does the loan interest lose its deductibility ?
Originally posted by Lily House
For example, I have borrowed the increased equity on a rental property to buy shares. The whole loan is tax deductable as I used the money to invest. However, I think the tax department would be umimpressed if I then sold these shares to, say, take an overseas holiday. In this case the original (share) loan is no longer for an investment.
... now is this really the case ? If you buy the shares with an equity loan, we know the interest on the loan is deductible.
But if you sell some of the shares (as you do if you were trading for example) - the purpose of the loan hasn't changed (fully) - the loan interest is still deductible right ?
But if you sell your entire portfolio of shares does this change the nature of the loan ? Surely you can sell all of the original share portfolio and buy more shares - I can't see a problem with that. But what about selling the shares without re-investing them. Does the loan interest lose its deductibility ?